GE Holders Await Turnaround Progress Report After Furious Rally

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Expectations are running high for General Electric Co.’s outlook call on Wednesday, as investors get ready for updates on how the industrial manufacturer’s turnaround is progressing.

The company kicked off 2021 on the right note, reporting strong fourth-quarter results in January that helped to slowly shore up investor confidence in the turnaround effort engineered by Chief Executive Officer Larry Culp. GE shares have been trading above the average analysts’ price target since mid-February, the longest such spell since mid-December.

GE shares rose more than 30% this year, while the broader S&P 500 Index advanced 1.74% and the S&P 500 Industrials Sector Index gained 6.25% over the same period. The stock was down 1% to $14.05 on Tuesday in early trading in New York.

Big items to watch for on the call include the company’s comments on its cash flow outlook, revenue and profit guidance, as well as segment details. Investors may also get some insight on reports that GE is nearing a deal with Ireland’s AerCap Holdings NV to join the world’s two biggest aircraft financiers.

GE Holders Await Turnaround Progress Report After Furious Rally

“If GE can start to convince investors that over 80 cents of industrial free cash flow per share is really attainable, the cash pile can start to be put to work instead of sitting on the balance sheet waiting to be drained by potential liabilities,” Barclays analyst Julian Mitchell wrote in a note to clients last month.

Given the company provided its outlook for 2021 in late January, GE is expected to reiterate those numbers, while providing more detail on how various segments are performing, with its aviation business being a key area of investor focus.

The unit, often called the company’s crown jewel in the pre-pandemic years when GE was struggling to turn around its power business, has hit a rough patch as demand for air travel, and thus aircraft, dried up in the wake of the Covid-19 outbreak.

Aviation Blues

“Look for probing on when GE expects its key aviation unit to bounce back in 2021 as the vaccine rollout should aid commercial air travel,” RBC Capital Markets analyst Deane Dray wrote in a note.

The recovery of aviation segment’s free cash flow is a critical question, according to Barclays’ Mitchell, who is keen to hear whether more cost-cutting is on the way, beyond the 11,000 job cuts in 2020.

Culp struck an upbeat note a month ago during a conference sponsored by Citigroup Inc. “When we get to the other side of the pandemic vaccinations and the like, lockdowns are being lifted, those planes are going to fly again,” Culp told investors. “And we’re going to be well-positioned with the youngest narrow-body fleet in the world.”

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