Calling General Electric's (GE -0.50%) first-quarter results "good" would be a bit of a stretch. After all, the struggling industrial conglomerate reported that adjusted industrial operating profit fell 14% year over year last quarter, causing adjusted earnings per share to tick down to $0.14 from $0.15 a year earlier.

Nevertheless, GE's Q1 results exceeded management's expectations, as well as the analyst consensus. Furthermore, this is the second straight quarter that GE has delivered an earnings report with no major negative surprises. As a result, investors are gaining confidence that the company is finally getting its house back in order under new CEO Larry Culp. This propelled GE stock to a 4.5% gain on Tuesday, following the earnings report.

Digging into the numbers

GE's revenue declined 2% year over year to $27.3 billion last quarter. However, the revenue decline was caused by the many asset sales that General Electric has executed over the past year. Organic revenue in its industrial businesses rose 5%.

Additionally, GE reported solid order activity for the quarter, which bodes well for future growth. Industrial orders increased 1% to $26.2 billion, driven primarily by continued strength in the company's aviation business.

Turning to profitability, GE's adjusted industrial operating margin fell to 8.8% from 10% in the year-ago period. This decline was expected, primarily due to one-time items in the renewables business. GE also reported margin contraction in its power and aviation segments, as GE Power is still early in its turnaround effort and the aviation business faces short-term headwinds due to the ongoing transition to the new LEAP family of engines for Boeing (BA 0.43%) and Airbus' high-volume narrow-body jets.

A GE gas turbine.

GE Power posted a profit last quarter, despite some margin contraction. Image source: General Electric.

Finally, adjusted industrial free cash flow improved to negative $1.2 billion from negative $1.7 billion a year ago. This beat management's expectations.

Despite the margin decline and lower cash burn last quarter, GE still expects modest margin improvement but a steep decline in free cash flow on a full-year basis. The company also reaffirmed all other aspects of its 2019 guidance.

The Boeing 737 MAX is a new problem -- but manageable

General Electric's management did note one new headwind that appeared last quarter: the global grounding of the Boeing 737 MAX. The LEAP-1B engine -- produced by CFM, a 50/50 joint venture between GE and Safran -- powers all 737 MAX aircraft.

The good news for GE is that there's no evidence that the engines played any role in the two fatal crashes that led regulators to ground Boeing's workhorse jet. However, Boeing has slowed production of its 737-family aircraft by nearly 20%, as it can't deliver any 737 MAX jets right now. (Initially, it had planned to boost output by about 10% this year.)

This will definitely hurt GE in the short run. Most notably, there will likely be a cash flow impact in the second quarter, as CFM waits to get paid for engines installed on jets that can't yet be delivered. Fortunately, all signs currently point to the Boeing 737 MAX being recertified within a few months, after which this headwind should fade. And longer term, even if some airlines decide to switch away from the 737 MAX, the main competing aircraft models primarily use LEAP engines as well.

GE stock has plenty of upside for patient investors

CEO Larry Culp was careful to warn investors that there will be ups and downs in GE's ongoing turnaround. But on the whole, the company's performance last quarter lends credence to Culp's projection that results will improve significantly over the next two years, as legacy costs and restructuring expenses subside.

Meanwhile, GE continues to reduce its debt and other obligations, mainly using asset sale proceeds. Last quarter, it received $2.9 billion from selling its transportation division, and it also agreed to sell its biopharma business to Danaher for $21 billion. Debt reduction will address one of the biggest investor concerns weighing on GE stock today.

Based on GE's guidance, free cash flow will return to positive territory next year and could reach perhaps $1 per share within a few years, after the company completes its turnaround initiatives. With GE stock still trading for around $10, there is a ton of upside for shareholders if the company can hit its medium- and long-term targets.