General Electric (NYSE:GE) shares are a rare bright spot on an otherwise miserable day on Wall Street, up 10% as of noon EDT, after the industrial conglomerate reported better-than-expected quarterly results and said it is making progress restructuring the business.
Before markets opened on Wednesday, GE reported adjusted third-quarter earnings of $0.06 per share on revenue of $19.4 billion, well ahead of analysts' consensus expectation for a $0.04-per-share loss on revenue of $18.7 billion. The results were messy, with non-cash impairment charges muddying the non-adjusted numbers.
The company said it has achieved about 75% of its target of more than $2 billion in cost reductions and more than $3 billion in cash improvements in 2020, while reducing debt by $11.7 billion year to date. GE expects to generate positive free cash flow from its industrial businesses in 2021, and says it should be able to generate $2.5 billion in cash from them in the fourth quarter.
"We are managing through a still-difficult environment with better operational execution across our businesses, and we are on track with our cost and cash actions," CEO Larry Culp said in a statement. "While our work continues, GE's transformation is accelerating."
Culp was brought to GE in late 2018 to try to turn around the poorly performing company, and his challenge has been made even harder due to the coronavirus crisis. COVID-19 has caused airlines to retrench and cut business to GE's massive aviation and aircraft engine business.
Indeed, aviation orders fell by more than half year over year, a big part of overall industrial orders posting a 28% organic decline.
GE is still a long way from healthy, but the results were a lot better than what analysts had feared, and Culp's impact on the business is beginning to show. There is still too much uncertainty and too many moving parts to tempt me to buy in, but there is good reason for investors to be excited about the direction GE is headed following its third-quarter report.