GE GE Aerospace

By Thomas Gryta 

General Electric Co. powered through a global pandemic that hobbled its aviation business, reporting a surge in cash flow from other divisions that helped it end 2020 on much firmer footing than it had warned of in the spring.

GE booked $4.4 billion in fourth-quarter cash flow, beating its own projection and ending 2020 without burning cash, a year ahead of schedule.

The Boston conglomerate has improved its cash generation by cutting overhead costs and jobs in its aviation unit while streamlining its power business. The fourth quarter was boosted by a flurry of power and renewable energy orders that closed in December, executives said.

"We had a strong finish with respect to orders that helped us from a cash perspective, both in power and particularly in renewables, but it was very hard to call as to whether those orders would indeed happen inside the calendar year," Chief Executive Larry Culp said.

"We had as good a year as we could have ever hoped for in 2020 relative to the multiyear journey that we're on," said Mr. Culp, who took over in October 2018 when GE was reeling from problems in its power unit and a legacy insurance business.

The coronavirus pandemic continues to pressure GE's jet-engine business, its largest division, but the overall results showed progress in the yearslong turnaround of the company that also makes health-care machines and power-generating equipment.

GE shares are up 60% in the last six months as investors are encouraged by continued improvement in cash flow, debt reduction and cost cutting. The S&P 500 index is up about 20% in the same period. GE shares gained about 5% in Tuesday morning trading but were still hovering below where they were when Mr. Culp took over.

GE's cash flow is closely watched as a sign of the health of the company's operations and ability to pay down debts. The company had predicted fourth-quarter cash flow of at least $2.5 billion. The company burned through $4.3 billion in cash in the first half of the year before reporting about $500 million in positive cash flow for the third quarter.

For the full year, GE reported lower revenue after shedding units, but positive cash flow of about $600 million from its industrial operations.

GE forecast $2.5 billion to $4.5 billion of cash flow for 2021, and Mr. Culp said the final result within that range will depend almost entirely on the aviation division's prospects. The air travel industry will eventually get back to 2019 levels, Mr. Culp said, but there is still too much uncertainty to predict the timing of that recovery.

GE expects the aviation market to begin recovering in the second half with 2021 revenue in the division flat or higher from 2020.

The GE aviation division's revenue fell nearly 35% to $5.8 billion in the fourth quarter, while orders fell by half. The drop in aviation accounted for much of the decline in the company's fourth-quarter revenue.

A GE joint venture makes the engines for Boeing Co.'s MAX jet, which was grounded in March 2019 after two deadly crashes but was cleared to fly again in November. Boeing reports financial results on Wednesday.

Cash flow was driven by the health-care division, which reported $2.6 billion in cash flow for the year excluding its biopharma operations, which it sold. The unit makes CT scanners, MRI machines and other hospital equipment.

GE reported a jump in business in both its power unit, which makes turbines for power plants, and its renewable-energy unit, which mostly makes wind turbines. In the fourth quarter, orders at power rose 26% and renewables were up 34%. Slack demand in the power unit had sapped GE's profit in prior years.

Mr. Culp became the first CEO from outside of GE after deep problems in its power unit and financial services arm forced it to slash its dividend and sell off businesses. He has sought to put the problems behind the company, and last month GE settled a yearslong accounting probe by the Securities and Exchange Commission for $200 million without admitting or denying the SEC's claims.

Overall, GE reported net income attributable to common shareholders of $2.44 billion for the fourth quarter, compared with a profit of $538 million a year before.

Excluding items, GE said its adjusted earnings were 8 cents a share, compared with Wall Street's estimate of 9 cents a share. Quarterly revenue fell 16% from a year before to $21.9 billion.

GE cut its debt by $16 billion in 2020 and ended the year with $37 billion in cash. The company continues selling assets, raising $735 million Friday from selling shares in Baker Hughes Co. GE owns about a 30% stake in Baker Hughes after combining its oil division with the company.

Write to Thomas Gryta at thomas.gryta@wsj.com

(END) Dow Jones Newswires

January 26, 2021 12:40 ET (17:40 GMT)

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