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General Electric Expects Negative Free Cash Flow in 2020

By Bradley Freeman – Updated May 28, 2020 at 5:41PM

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Checking in on the General Electric comeback.

General Electric (GE -0.65%) forecasted negative free cash flow for the full year this week.  The new CEO, Larry Culp, took over the company's sprawling asset portfolio 18 months ago, and still has work to do.

Balance sheet concerns at GE have been mitigated by a sale of GE's healthcare unit. Proceeds from that sale raised the company's liquidity position by over 20% during Culp's first year on the job, which should help offset this year's negative free cash flow. Free cash will be further aided by the recently announced sale of its lighting business as well.

GE Aviation

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Big Challenge Remaining

GE's aviation unit is the root of the cash burn problem. The daunting combination of a pandemic and 737 Max grounding (GE makes part of the engine) removes a cash generating machine for General Electric while the pandemic limits aviation business elsewhere. Boeing's issues are a significant contributor to GE's cash burn. 

Good news may finally be on the way for Culp, though, with airlines reporting that demand for air travel is bottoming.  

GE profitability concerns still loom, but asset sales will help ensure stability while Culp revamps GE and the 737 Max gets back in the air. 

Bradley Freeman owns shares of Boeing. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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