GE Aerospace (GE)

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General Electric (GE) shares surge on positive cash flow news and restructuring updates
By: Investing.com | September 14, 2023

Shares of General Electric (NYSE:GE) closed at $115.65 on Thursday, marking the second-highest closing price in the past year, influenced by positive cash flow news and favorable overall market conditions. The S&P 500 and Dow Jones Industrial Average also saw increases of 0.8% and 1%, respectively.

The company's CFO, Rahul Ghai, noted that GE's aerospace sector has been performing well and that the renewables and power sectors are on track. This robust performance is expected to contribute towards the higher end of GE's third-quarter earnings per share (EPS) and free cash flow guidance. The projected third-quarter EPS ranges between 45 cents and 55 cents, with Wall Street analysts predicting the upper limit of this range.

The free cash flow for the third quarter of last year stood at approximately $1.2 billion, while projections for this year's third quarter are around $900 million. This positive outlook has been a significant factor in the recent surge in GE's share price.

In terms of restructuring, GE has provided updates on its plan to spin off its power generation business, GE Vernova. The company aims for Vernova to become independent in early 2024, starting its operations with more cash than debt and an investment-grade credit rating.

Post-separation, three businesses will emerge: GE Aerospace led by Larry Culp, GE Vernova under the leadership of Scott Strazik, and GE HealthCare Technologies managed by Peter Arduini. It's worth noting that GE HealthCare has already become an independent entity following its separation in early 2023.

Once the restructuring of General Electric is completed, it is anticipated that the three remaining businesses will maintain investment-grade credits and possess strong franchises within their respective industries. This strategic move is expected to streamline operations and enhance the company's focus on its core sectors.

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