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Why General Electric Stock Just Popped 7.5%

By Rich Smith – Sep 16, 2020 at 1:46PM

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Investors take its CEO's encouraging words to heart.

What happened

Shares of industrials giant General Electric (GE 2.58%) are hopping in afternoon trading Wednesday, up 7.5% as of 1:10 p.m. EDT as GE CEO Larry Culp expounds on the company's plans at a Morgan Stanley investor event currently in progress.

So what

What's driving GE shares higher? is giving minute-by-minute updates on the CEO's comments. Among the encouraging news:

  • GE's recent second quarter -- the results from which were not great -- is likely to have been the "toughest period" GE will experience this year.
  • GE burned through $3 billion in negative free cash flow in the first half of this year, according to data from S&P Global Market Intelligence. However, this year's second half should show improvement, with cash flow (if not free cash flow) at least turning positive. (Cash flow alone was negative $1.4 billion in the first half, with the remainder of the cash burn accounted for by capital investments.)
  • And GE expects to have momentum on its side as it emerges from 2020 into 2021.
Stock up arrow rising over 2020

Image source: Getty Images.

Now what

In short, this industrial bellwether seems to be promising a brighter future after it emerges from the shadow of COVID-19. At a price less than 16 times earnings, paying a modest 0.6% dividend yield, and with the prospect of self-sustaining free cash flow on the horizon, investors today appear willing to take the CEO at his word, and give GE stock another spin.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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