GE Stock Soars As Cash Flow Improves Faster, While Rival Cuts Raytheon Deeper

General Electric (GE) stock soared after CEO Larry Culp said Wednesday that he sees the company reaching positive cash flow earlier than previously expected.


Culp said at the Morgan Stanley Laguna Conference that he sees positive free cash flow in the second half of the year and continuing into next year. That’s earlier than prior estimates for 2021.

GE burned through $4.3 billion in cash in the first half of 2020, due to its weak commercial aviation business. On the second quarter earnings call July 29, Culp warned that the “macro environment could deteriorate further” and forecast a lengthy aviation recovery.

Meanwhile, GE’s “crown jewel” reached a supply agreement as the coronavirus pandemic continues to weigh on air travel.

Barnes Group (B) Wednesday made a deal with GE Aviation to build parts of its Leap engine program. The engines are used on the troubled Boeing (BA) 737 Max and Airbus‘ (EADSY) A320 neo.

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GE Stock Retakes Key Level

GE shares jumped 10.7% to 6.75 on the stock market today, closing above their 50-day average for the first time since July, according to MarketSmith chart analysis. GE stock still remains about 50% below its February high.

And the aviation sector faces years of recovery from the coronavirus collapse. Also Wednesday, GE’s jet-engine rival Raytheon Technologies (RTX) announced it would lay off 15,000 employees due to the weakened demand for new aircraft.

That’s more than the 8,500 projected in July for the parent company of Pratt & Whitney and Collins Aerospace.

At the Morgan Stanley conference, CEO Greg Hayes said the job cuts were part of plans to cut costs by $2 billion this year amid Covid-19.

“We see a gradual return to flight across all commercial markets but probably not a full return to 2019 levels until somewhere around 2023,” Hayes said, according to Bloomberg. “It really depends on the timing of a vaccine.”

Earlier this year, GE Aviation said it plans to cut up to 13,000 jobs, or about 25% of its workforce.

Follow Gillian Rich on Twitter @IBD_GRich for investing news and more.


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