General Electric shares pop nearly 5% on earnings beat—Cramer and other experts react
It was an industrious day for General Electric.
The beleaguered company’s stock popped nearly 5% after it reported earnings on Tuesday that topped Wall Street’s earnings and revenue expectations.
GE CEO Larry Culp also reaffirmed the conglomerate’s muted 2019 guidance, a move many took as a sign that things wouldn’t get worse from here.
Market watchers were largely impressed by the results, including the significant slowdown in GE’s cash burn.
Here are some of their reactions:
Jim Cramer, the host of CNBC’s “Mad Money” and a former GE shareholder for his charitable trust, said it’s still too early to tell if the worst is over:
“I want to jump all over it and say, ‘You know what? The coast is clear.’ [But] I think that [CEO] Larry Culp will be the last person who says the coast is clear. They still do not understand. They’re getting their arms around [the] long-term care problems, getting their arms around how much money they can really make with turbines. … But the fact is it’s a crummy business. And it was a good business. The best thing that could happen there would be the other companies that make turbines just drop out. Because otherwise someone’s got to blink, because what a bad business.”
Daniel Babkes, senior research analyst at Pzena Investment Management, said the numbers showed signs of improvement:
“There’s two key issues with this company, two key challenges that everybody’s focused on. One of them is the performance of the power segment, which has been the big drain on earnings and cash flow over the last couple of years. I think the Street was modeling a loss of over $200 million for that segment, and it actually looks as though the segment posted a very slight profit, so that’s a little bit better than what people were expecting. The other big issue with the company is the balance sheet, and I think everyone’s paying very close attention to the cash flow generation. Now, there’s seasonality in this business, and we know that this is going to be a weak year for cash generation, but the expectation for this quarter was actually a cash burn of about $3 billion, and it looks like the adjusted industrial free cash flow was negative [$]1.2 [billion]. So it’s coming in significantly higher than what people had feared. […] The numbers that we’re seeing are often times, in a business like this, a reflection of the operational decisions that have been made over the past couple of years. So what Larry Culp and what the management team have told the market is 2019 is not going to be a good year from a numbers perspective, but they’re instituting some operational changes currently to try to drive better performance going forward.”
Melius Research Chairman and CEO Scott Davis was pleasantly surprised by the struggling industrial’s results:
“I didn’t hate what I saw in the numbers, which is the first time I could say that in probably five years. The numbers were good. They weren’t great. They were solid. It felt more like a normal industrial company for quite some time. The last few years it just felt like a levered bank with a bad industrial business, and now it feels like a much smaller bank with an industrial business that’s turning around. […] On the call they said there was some pushed-back restructuring, so some of it is timing. Some of it, I think, is probably better underlying operations. I mean, Larry Culp is an operating guy. That’s what he did at Danaher. He’s a factory-up guy. So, on the conference call, the question I asked him was about lean manufacturing, and are these factories ready to get better? And he said yes, they are. And I think that’s where you’ll see the major improvement.”