What happened

Shares in engineering and design software company General Electric (GE 0.94%) rose 16.1% in July, according to data provided by S&P Global Market Intelligence. The more significant part of the move comes after a well-received set of second-quarter earnings released on July 26. 

It's not that the results were anything special in themselves, but that they were not as bad as many had feared they would be. Moreover, management maintained its full-year revenue and earnings guidance but reduced expectations for free cash flow (FCF) in 2022 by referring to a $1 billion "push out." The push out is due to supply chain disruptions and the "timing of renewable energy-related orders" CEO Larry Culp said on the earnings call. In addition, management fell short of confirming the long-established aim of hitting $7 billion in 2023.

There was also a reduction in full-year earnings guidance for GE Healthcare, and I think the segment has a challenge in meeting even the reduced guidance for $3 billion in profit. Meanwhile, the deterioration in GE Renewable Energy continues, with the segment having lost $853 million so far this year.

So what

That said, much of the bad news was already assumed in the stock's price at the start of July. Also, GE is, at least for now, an industrial conglomerate -- there's never going to be a time when all of its businesses are firing on all cylinders at the same time. Right now, GE Aviation (forecast segment profit of $3.8 billion to $4.3 billion in 2022) is carrying the earnings and FCF baton, ably supported by GE Power ($1 billion to $1.2 billion) and GE Healthcare ($3 billion).

It's enough to justify believing that GE can hit an amount of earnings and FCF this year to make the stock attractive. For example, if you conservatively take the $1 billion of FCF pushed out from 2022 from the low end of previous guidance of $5.5 billion to $6.5 billion, you get $4.5 billion. Based on the current market cap of around $82 billion, GE would trade on 18 times 2022 FCF. 

That's a good multiple for a company set to ramp up earnings and FCF in the coming years as GE Aviation benefits from a commercial aerospace recovery.

Now what

The results were good enough to de-risk the stock from any concerns that the GE Healthcare spinoff might derail in early 2023. As such, investors can look forward to a release of value as GE is broken up in the coming years. Of course, there are still question marks around GE's guidance in 2022, but valuations still matter, and the stock looks attractive on a risk/reward basis at this price.