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30 January 2020

GE Jekyll and Hyde quarter; revenues fall in power, renewables up 2%

9GE figures were out this week and it missed earnings forecasts by the narrowest of margins and beat revenue targets by a similar amount. Opinion remains split on the massive company as a whole, with some suggesting it is over-valued and potentially committing fraud by holding too little cash for its health segment to support payouts, and others suggesting it is on the way back to health.

In GE numbers out this week, it generated free cash flow in its industrial segment of $3.9 billion in the quarter, which meant it was positive to the tune of $2.3 billion for the full year, way ahead of expectations, despite $1.4 billion of cash headwind from the Boeing 737 MAX grounding. It was these facts alone that drove a 10% rise in the overall GE stock price, along with debt reduction at GE Capital.

We would suggest that long term the truth lies somewhere between the naysayers and the bulls, and it may still be forced to sell more assets before investors can rest easy. GE said that it generated $4.5 billion in cash for Q4, on revenues of $26.2 billion in the quarter.

The segments we follow, Power and Renewable Energy were like Jekyll and Hyde. Power orders fell 30% in the quarter to $4.46 billion and 25% for the year to $16.9 billion; but actual revenues on completed projects were flat at around $5.4 billion, with a profit of $302 million, up by around $1 billion from last time’s $786 million loss. Gas turbines are down 8%. Renewables showed orders off 11% but revenues for the quarter up 2% to $4.7 billion with a segment loss of $197 million. The biggest weakness was in hydro and grid orders, and onshore wind was flat, but with a higher order flow. GE onshore wind had record deliveries of 1,553 turbines, mostly in the US, but it had execution issues, causing the losses.

Aviation continues to be fraught, but future orders are up 22% and revenues up 6% to $8.9 billion with a profit up 19% to $2 billion. Healthcare is flat all round.