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General Electric Forecasts Weaker Than Expected 2019 Earnings

General Electric Forecasts Weaker Than Expected 2019 Earnings
The 2019 earnings guidance issued by General Electric missed the expectations of analysts as the company also warned that it would be burning up as much as $2 billion in cash for its industrial division. The CEO of the company Larry Culp also warned that for the conglomerate, the first quarter of this "reset" year will be the weakest.
Compared to Wall Street expectations of 70 cents a share, GE said it precast a full-year 2019 earnings in the range of 50 to 60 cents per share. The company also warned about the adjusted industrial free cash flow burn in the year reaching about $2 billion. It however also said that the cash flow would become positive in the next year.
GE said that cash would also be burned for its power division this year, But that would get imp[roved in 2020 at a rate that would be "significant", the company said and added that there would also be a fall in free cash flows in healthcare in 2019 and pick to next year in 2020.  The company would also have to face a loss in the range of $300 million to $500 million because of the impact of U.S. tariffs on China-made goods. It would also incur a loss as high as $2.7 billion for its overall restructuring charges.
"GE's challenges in 2019 are complex but clear. We are facing them head on as we execute on our strategic priorities to improve our financial position and strengthen our businesses," said CEO Larry Culp. "We have work to do in 2019, but we expect 2020 and 2021 performance to be significantly better with positive Industrial free cash flow as headwinds diminish and our operational improvements yield financial results."
"We will continue to take thoughtful actions to reduce downside risk and increase upside optionality to create long-term value for our shareholders," Culp added in comments ahead of the group's investor day in New York.
The industrial free cash flow of GE would change from $4.5 billion in 2018 to negative territory in the current year as "market pressures impacting volume" as well as "project and execution challenges" would have a negative impact on the power division of the company – which is already under pressure, Culp told the JP Morgan Aviation, Transportation & Industrials conference in New York, earlier this month.
The margins for its healthcare division would roughly be the same as it has been achieved in 2018, the company said and the organic revenue would be range of low to mid-single digits. This was also confirmed by the investor day presentation on Thursday.
For the g\conglomerate under pressure, 2019 would be a "year of change", Culp has vowed, while also pledging that the company would continue to lay emphasis on developing GE's critical power business as well as in reducing its debt burden by selling off its assets and through spin-offs.
"Simply put, we have too much debt and we need to reduce it thoughtfully and soon," Culp said earlier this year. "Once we put our balance sheet in a healthier place, we'll be in a better position to play offense across all our businesses."

Christopher J. Mitchell

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