Global Times US Edition - - BIZAVI G -

ac­counted for its in­creased profit fore­cast.

“The EPS in­crease of 5 cents ... is less than this quar­ter’s 6-cent tax ben­e­fit,” Gordon Has­kett analyst John Inch said in a note.

After surg­ing 4 per­cent in pre­mar­ket trad­ing, GE shares fell less than 1 per­cent to $10.45.

GE’S in­dus­trial busi­nesses suf­fered an­other tough three months, with mar­gins falling by as much as 8 per­cent­age points at renewable en­ergy. But they gen­er­ated more cash than ex­pected, in part be­cause it has be­come more ag­gres­sive in billing cus­tomers, col­lect­ing pay­ments and re­duc­ing in­ven­tory, Chief Ex­ec­u­tive Larry Culp said on a con­fer­ence call.

GE’S power busi­ness, which has long been a drag on earn­ings, posted a $117-mil­lion profit. But its rel­a­tively strong aviation busi­ness suf­fered as prob­lems stretched on with Boe­ing’s 737 MAX jet­liner, which reg­u­la­tors grounded in March.

CFM In­ter­na­tional, a joint ven­ture be­tween GE and France’s Safran SA, sup­plies en­gines for the 737 MAX.

The MAX could cost GE $1.4 bil­lion in cash if the plane re­mains grounded all year, as now ap­pears pos­si­ble, GE said.

“That was not in the pre­vi­ous guid­ance,” said RBC Cap­i­tal Mar­kets analyst Deane Dray, who added that in­vestors re­acted by sell­ing GE after the con­fer­ence call.

But air­lines will fly older planes in place of the MAX and those use more spare parts, a lu­cra­tive prod­uct line for GE, Dray said. “We have to be­lieve GE has am­ple con­tin­gency in their free cash flow out­look to have taken a bold, un­ex­pected step to in­crease guid­ance,” Dray said. “No one was ex­pect­ing them to.”

In­vestors have watched GE’S cash gen­er­a­tion as it has failed to keep pace with earn­ings in re­cent years, rais­ing con­cerns that GE’S ac­tual fi­nan­cial per­for­mance was falling short of stated re­sults. De­spite this, Culp in May said he would fo­cus on gen­er­at­ing cash and let earn­ings be “al­most like a byprod­uct,” Dray said.

GE said it now ex­pects higher in­dus­trial rev­enue growth and bumped up earn­ings per share by 5 cents to be­tween 55 cents and 65 cents. It shifted its fore­cast for in­dus­trial free cash flow to be­tween neg­a­tive $1 bil­lion and pos­i­tive $1 bil­lion, from $0 to neg­a­tive $2 bil­lion.

Loss per share from con­tin­u­ing op­er­a­tions was 3 cents, down from a profit of 8 cents a year ago. On an ad­justed ba­sis, GE earned 17 cents per share, in­clud­ing the tax gain, com­pared with an­a­lysts’ es­ti­mates of 12 cents, on av­er­age, ac­cord­ing to IBES data from Refini­tiv. Rev­enue fell 1.1 per­cent to $28.8 bil­lion.

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