General Electric (NYSE:GE) is still at least six months away from reporting sustainable revenue levels on a consistent basis. Yet it still managed to report better free cash flow. With guidance unchanged, investors could start accumulating GE for the long-term.
GE describes 2019 as a reset year, so expect writedowns, asset sales, debt reduction, and operational cuts to limit the turnaround. The cost-cutting efforts and shedding of non-core businesses should benefit the company in the long-run, heading into 2020. GE forecast adjusted industrial FCF to return to the positive territory next year, accelerating in 2021.
Asset Sales
The BioPharma sale added $20B+ in proceeds, while the transportation merger added $2.9 billion. GE Capital assets fell, as planned, by $1.1 billion. Overall, liquidity improved as Industrial now has $17 billion and GE Capital has $15 billion.
Looking ahead, GE must lower base costs for the Gas Power unit. Its Aviation unit is a key driver for long-term growth, where GE needs utilization for engine improving. One positive development in the period was GE Capital settling WMC for $1.5 billion.
Takeaway
GE will fluctuate around the $9 - $10.50 range in the near-term but could break out later this year if the company continues to report an improvement in its business. Per Tipranks, analysts have an upside price target of $11.18, or a potential return of 9% over the next year.
