What happened

Shares of General Electric (NYSE:GE) traded up 5% on Tuesday morning after the industrials giant reported better-than-expected first-quarter earnings and eased some concerns over the company's cash flow. The stock was initially up 8% but has come back to earth as investors gained more context about the quarter.

So what

General Electric, which is down nearly 90% from highs reached in the late 1990s due to its soaring debt and troubles at key business units, reported first-quarter adjusted earnings of $0.14 per share on revenue of $27.3 billion, beating analyst expectations for $0.09 per share in earnings on sales of $27.05 billion.

A GE wind turbine under construction.

GE bet big on renewables, including its wind turbine business. Image source: General Electric.

CEO Larry Culp said in a statement that in the first quarter, the company "continued to execute on our priorities to improve our financial position and strengthen our businesses," including agreeing to sell part of its healthcare operation to Danaher for $21 billion and merging its transportation division with Westinghouse Air Brake Technologies to raise cash.

Orders rose 9% in the quarter, with strength spread across power, oil and gas, healthcare, and elsewhere. The company's industrial free cash flow for the quarter was negative $1.2 billion, significantly better than the $1.76 billion in cash used in the first quarter a year prior and ahead of what analysts had expected. In March, Culp warned that GE's industrial free cash flow would be negative in 2019, sending shares down 12% on the day.

Now what

The free cash flow is likely the number investors are focused on, and it is worth noting that despite the better-than-expected burn, GE did not improve its full-year free cash flow guidance. In fact, Culp said on an earnings call Tuesday morning that the beat was largely due to the timing of certain orders and customer payment schedules, implying that the outlook is unlikely to be revised.

There's good reason to hope that the worst is over for GE. Under Culp, the company has clearly defined its turnaround strategy, and with significant exposure to areas including aerospace and healthcare, there is reason to believe GE's industrials businesses can show growth for years to come. But the turnaround will not happen quickly, and investors would be wise not to read too much into the results of any three-month period along the way.