GE shares fall on cash, business worries though profit beats

Fri Apr 21, 2017 2:43pm EDT
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By Alwyn Scott

NEW YORK (Reuters) - General Electric Co reported quarterly sales and adjusted earnings results that beat analysts estimates on Friday, but its shares fell on concerns about some of its industrial businesses and its cash outflow.

The maker of jet engines, power plants and other industrial equipment also reported a negative $1.6 billion in cash flow from industrial operating activities compared with a negative $600 million it expected for the quarter due to a $1.3 billion increase in working capital and the timing of bills to customers.

Investors have been watching cash flow as an indicator of GE's operating performance, and GE said it still expects to hit its cash target of $12 billion to $14 billion for the full year.

Shares were down 2.3 percent at $29.57 in afternoon trading, making it the second-biggest decliner on the Dow Jones Industrial Average.

"There was immediate disappointment that cash came in low," said Deane Dray, analyst at RBC Capital markets. Analysts asked numerous questions about it on the conference call and "it gave investors a reason not to feel good about the quarter."

The company also raised concern by giving itself wiggle room to deliver fewer LEAP aircraft engines this year, a key risk for the company. It said the range for the year was 450 to 500 engines, instead of nearly 500 it stated earlier.

"It is notable that GE is taking a more cautious slant by backing away from a firm target of "500," Vertical Research Partners analyst Rob Stallard said.

But GE Chief Financial Officer Jeff Bornstein said in an interview there was no change in the LEAP forecast.   Continued...

A sign marks a General Electric (GE) facility in Medford, Massachusetts, U.S., April 20, 2017.   REUTERS/Brian Snyder