Decision time

27 April 2020 By John Foley Follow @johnsfoley

Larry Culp’s recent goal of reducing the company’s $59 bln of debt to a manageable level this year is toast: It relied on cash flow from the airlines unit. He could hunker down, but that risks making GE weaker. Selling, say, a stake in the healthcare business would be wiser.

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General Electric is set to report first-quarter financial results on April 29. Analysts are forecasting $751 million of earnings, according to Refinitiv, roughly the same as the same period last year and half the figure from the final quarter of 2019.

For the first quarter, GE expects cash flows from its industrial businesses, which include aviation, healthcare, power and renewables, to be negative $2 billion. It had previously said it expected to make between $2 billion and $4 billion in the full year.

The U.S. conglomerate withdrew its guidance for the full year on April 9 because of the Covid-19 pandemic. It said on April 13 that it had more than $47 billion of cash on hand, including $20 billion from selling to Danaher a division that services biopharmaceuticals companies.

GE had $59 billion of debt at the end of 2019, including its large pension deficit. Its goal had been to reduce net debt to 2.5 times its EBITDA by the end of 2020, from 4.2 times.

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