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As analysts predict, General Electric’s full-year cash burn will total about $2 billion, which means $1 billion in positive free cash flow over the second half of the year.
On Wednesday, Boston-based conglomerate General Electric Company (NYSE: GE) held its annual Morgan Stanley Laguna Conference. During the event, Executive Director at Morgan Stanley Josh Pokrzywinski and General Electric CEO Larry Culp discussed the company’s performance. General Electric is making good progress towards its cost-cutting plan and expects to have positive cash flow during the second half of 2020. Amid the news, GE stock has soared.
At the beginning of 2020, General Electric management expected to generate between $2 billion and $4 billion in industrial free cash flow. However, the COVID-19 pandemic disturbed all the company’s plans. As a result, its industrial business burned through about $3 billion in the first half of this year. In the second half of 2020, General Electric is planning to show improvement, with cash flow at least turning positive. Its performance has already started recovery.
Larry Culp stated:
“I sit here today feeling very confident about where we are and where we’re going despite all of the trials and tribulations that Covid has certainly thrown at us”.
He further added:
“Our markets are by and large stabilizing but not in any way rapidly recovering,” Culp said. “But we’re not going to wait on the markets. That’s why we’re taking the actions that we are.”
As analysts predict, General Electric’s full-year cash burn will total about $2 billion, which means $1 billion in positive free cash flow over the back half of the year.
Gordon Haskett analyst John Inch said:
“On its [second-quarter] earnings call, the company [said] sequential improvement in earnings and cash in the second half of 2020 is achievable. Culp indicated more definitively that the company would deliver positive [free cash flow] in the second half.”
GE Stock Up in Early Trading
After the conference, General Electric stock jumped on positive cash flow expectations. On Wednesday, it closed at $6.75 per share or 10.66% up. After hours, it added another 0.15% to $6.76. In the pre-market today, GE stock is further up, by the moment of writing it has added 1.33% to reach $6.84. GE market cap is $53.4 billion.
After the coronavirus sell-off, General Electric stock bounced back, but it is still not much above the May low of $5.48. Year-to-date, GE shares are as much as 39.52% down. And despite these negative figures, General Electric remains a popular stock. Roughly 85 million shares are bought and sold on a typical day. Positive cash flow expectations may further correct the situation, as investors are already betting on General Electric’s short-term prospects.