General Electric (GE) will hold an investor event Wednesday, and analysts are expecting more detail on the industrial giant’s aviation and cash flow outlook. GE stock rose.
Other new details that could emerge include margin targets in its power and renewable energy businesses.
Last week, Morgan Stanley analyst Joshua Pokrzywinski hiked his target on GE stock to 17 from 13, while affirming an overweight rating.
“We believe the March 10 outlook is a catalyst and it sets up a multiyear path to above-consensus FCF of ~$0.90 (per share) in 2023 with solid growth in the core businesses further beyond,” the analyst said. For 2021, he estimates industrial FCF of 48 cents per share.
The single biggest driver of improvement will be GE Aviation as the air travel recovers, Pokrzywinski added. Key customer Boeing (BA) has resumed deliveries of its 737 Max and is taking orders again after regulators cleared to plane to carry passengers.
GE could also update its full-year earnings guidance. In January, GE predicted 2021 EPS of 15-25 cents and industrial free cash flow of $2.5 billion-$4.5 billion.
Industrial free cash flow rose 12% to $4.4 billion in Q4 and ended 2020 slightly positive at $606 million. That’s despite burning $4.3 billion in the first six months of the year.
Shares rose 1% to 14.32 Wednesday stock market trading. GE stock is extended off a 12.01 three-weeks-tight entry and an alternative entry around 11 off support at the 10-week line, according to MarketSmith chart analysis.
The relative strength line for GE stock is rising within a multiyear downtrend. Jet-engine rival Raytheon Technologies (RTX) was flat, and aerospace supplier Honeywell (HON) added 0.7%. Boeing stock rose 3.7% as monthly orders outnumbered cancellations for the first time since 2019.
Meanwhile, GE’s multiyear restructuring is charging ahead, following sales of the biotech unit, light bulb business, and a majority stake in its oil field services segment.
Now, GE is looking to sell the biggest part of GE Capital — aircraft leasing unit GE Capital Aviation Services (GECAS).
The company is reportedly nearing a $30 billion deal to combine GECAS with Ireland’s AerCap Holdings (AER), sources told the Wall Street Journal over the weekend. The move could speed up GE’s turnaround, improving its balance sheet and cash flow.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
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