Markets
GE

Why Shares of General Electric Are Up Today

What happened

General Electric (NYSE: GE) shares are a rare bright spot on an otherwise miserable day on Wall Street, up 10% as of noon EDT, after the industrial conglomerate reported better-than-expected quarterly results and said it is making progress restructuring the business.

So what

Before markets opened on Wednesday, GE reported adjusted third-quarter earnings of $0.06 per share on revenue of $19.4 billion, well ahead of analysts' consensus expectation for a $0.04-per-share loss on revenue of $18.7 billion. The results were messy, with non-cash impairment charges muddying the non-adjusted numbers.

The GEnx aircraft engine

Image source: General Electric.

The company said it has achieved about 75% of its target of more than $2 billion in cost reductions and more than $3 billion in cash improvements in 2020, while reducing debt by $11.7 billion year to date. GE expects to generate positive free cash flow from its industrial businesses in 2021, and says it should be able to generate $2.5 billion in cash from them in the fourth quarter.

"We are managing through a still-difficult environment with better operational execution across our businesses, and we are on track with our cost and cash actions," CEO Larry Culp said in a statement. "While our work continues, GE's transformation is accelerating."

Now what

Culp was brought to GE in late 2018 to try to turn around the poorly performing company, and his challenge has been made even harder due to the coronavirus crisis. COVID-19 has caused airlines to retrench and cut business to GE's massive aviation and aircraft engine business.

Indeed, aviation orders fell by more than half year over year, a big part of overall industrial orders posting a 28% organic decline.

GE is still a long way from healthy, but the results were a lot better than what analysts had feared, and Culp's impact on the business is beginning to show. There is still too much uncertainty and too many moving parts to tempt me to buy in, but there is good reason for investors to be excited about the direction GE is headed following its third-quarter report.

10 stocks we like better than General Electric
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and General Electric wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of October 20, 2020

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

GE

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More