General Disappointment

GE announced financial targets

Image source:

What's going on?

General Electric (GE) once Americas biggest company is in danger of being reduced to the ranks: it released 2019 financial forecasts on Thursday that fell short of investors expectations.

What does this mean?

Along with a disappointing profit prediction for 2019, GE expects its free cash flow to be on the small side too. This closely watched figure measures the amount of cash generated by GEs core industrial business which can be used for things like reinvesting in operations or paying down debt. Last year, GEs free cash flow was $4.5 billion; this year, the best-case scenario is, ahem, $0 with the company saying a likelier figure is somewhere between that and negative $2 billion.

Why should I care?

For markets: Its always darkest before the dawn.


Despite the news, investors sent GEs stock up 3%. The General recently hired a new captain whos been busy restructuring parts of the business and it looks like investors are on board. According to TipRanks data, investor sentiment is currently very positive on the companys stock (tweet this), with only one analyst recommending selling it prior to Thursday. Having lost over two thirds of its value since mid-2016, perhaps GEs changes are just what the medic ordered when it comes to pulling the company back from the brink.



The bigger picture: Kicked while its down.


GEs new CEO is navigating troubled waters at the helm of the 127-year-old company. Hes been selling off parts of GE and using the cash to pay off some of its monstrous debt: $121 billion in December. With free cash flow shrinking, that debt is extra worrisome. And while disconnecting more bits of its sprawling business should help, it may be tough for the company to negotiate a good price when the whole world knows how much it needs the cash. Assuming all goes to plan, however, GE is predicting an improvement next year.

Originally posted as part of the Finimize daily email.

The top 2 financial news stories in 3 minutes. Join over one million Finimizers

Read next

Groundhog May

Sign up to Finimize

Get the two most important global financial news stories each day. Sent at midnight UK time.

Get started with one email a day

The top financial news stories in 3 minutes.