Please ensure Javascript is enabled for purposes of website accessibility

GE Foresees Coronavirus Hurting Q1 Earnings

By Alison Healey - Mar 4, 2020 at 10:06AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The conglomerate expects to take a significant hit from the outbreak.

General Electric (GE -0.20%) issued new guidance Thursday, warning that it projects the impacts of the global coronavirus outbreak will reduce its free cash flow by $300 million to $500 million in the first quarter.

GE management characterized the outbreak as an "evolving variable," and projected that COVID-19 would similarly take an approximately $200 million to $300 million bite out of its Q1 operating profits. The company now projects adjusted earnings of approximately $0.10 per share for the quarter, and approximately negative $2 billion in free cash flow for its GE Industrial unit.

A cartoon depicts people wearing masks in response to coronavirus threat.

Image source: Getty Images.

2020 projections reaffirmed

The former blue chip reaffirmed its prior full-year adjusted earnings guidance range of $0.50 per share to $0.60 per share, and its free cash flow guidance for GE Industrial  of $2 billion to $4 billion. It continues to expect the adjusted profit margin for its GE Industrial unit to expand organically by 0 to 75 basis points.

"Compared to 2019, GE's 2020 outlook assumes lower free cash flow and profit from BioPharma due to its planned disposition in the first quarter, subject to regulatory approval, as well as reduced cash from Baker Hughes shareholder dividends," the company said. "GE expects to offset these effects through performance improvements and reduced non-operational headwinds. GE's 2020 outlook also assumes the 737 MAX returns to service in mid-2020, in line with Boeing (BA 2.28%)."

Should investors be concerned?

GE remains in the midst of a financial turnaround, continues to face the headwinds created by Boeing's troubles, and has not convinced investors of its ability to continue to increase free cash flow on an ongoing basis. Investors might be wise to wait for more information on these factors, as well as on how the COVID-19 outbreak impacts the company in the medium term, before deciding about whether to add GE to their portfolios.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

General Electric Company Stock Quote
General Electric Company
$63.54 (-0.20%) $0.13
The Boeing Company Stock Quote
The Boeing Company
$139.84 (2.28%) $3.12

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.