GE Has a No-Drama Earnings Beat, Powered by Its Free Cash Flow

Larry Culp was hired in late 2018 to turn around a then-floundering GE. Industrial free cash flow generated from 2018 to 2020 amounted to $1.7 billion, down from a rough average of $12 billion in 2015 to 2016. During the pandemic, cash flow skidded to some $600 million. “[Free cash flow] has been the fixation for investors since [Culp] took over, and for obvious reasons.…It was awful,” wrote Melius analyst Scott Davis. He called the new guidance a “notable and critical positive.” RBC’s Deane Dray said in a note, “GE’s ‘North Star’ continues to be improving [cash flow].” He rates GE shares a Buy, with a $16 price target.

Another bull, William Blair’s Nicholas Heymann, praised GE’s “steady sequential improvement across virtually all businesses and key metrics.” He sees 30% upside potential for the stock and rates it a Buy, but hasn’t published a price target. A 30% gain, however, would put it around $17.

Not everyone is that upbeat; Wall Street’s average target is $14.68.

Oppenheimer’s

Christopher Glynn rates the shares a Hold, also with no price target. Still, he sees positive changes at GE. And it’s suddenly hard to find bears on General Electric. Some 67% of analysts slap a Buy on its shares, versus the average Buy ratio for S&P 500 stocks of 55%. No one says sell.

Next Week

Monday 8/2

CNA Financial,

Global Payments,

JELD-WEN Holding,

Loews,

Arista Networks,

Leggett & Platt,

Vornado Realty Trust,

ZoomInfo Technologies, Woodward,

Take-Two Interactive Software,

Heineken, Trex, Ferrari,

Ultra Clean Holdings,

and

Simon Property Group

are expected to release financial results.

The Institute for Supply Management releases its Manufacturing Purchasing Managers’ Index for July. Consensus estimate is for a 60.8 reading, up from 60.6 in June.

The Census Bureau reports construction spending for June. Expectations are for a 0.4% month-over-month rise, after a 0.3% decline in May.

Tuesday 8/3

Eaton, BP,

Under Armour,

Lyft,

Clorox,

Amgen,

Akamai Technologies,

Cummins,

Eli Lilly,

Alibaba Group Holding,

Nikola, EnPro Industries,

Warner Music Group,

Pitney Bowes,

Tennant,

Phillips 66,

KKR,

Gartner,

Henry Schein,

Dun & Bradstreet Holdings,

Conoco

Phillips, and

Jacobs Engineering Group

host conference calls to discuss financial results.

The Census Bureau is slated to report factory orders for June. Economists predict that orders increased 1.0% during the month, compared with a 1.7% rise in May.

Wednesday 8/4

Sony Group,

CVS Health,

Kraft Heinz, SoftBank,

General Motors,

Progressive,

Etsy,

Electronic Arts,

Western Digital,

Uber Technologies,

Roku,

MGM Resorts International,

Fox, and Re/Max Holdings are expected to host earnings calls.

The Bureau of Economic Analysis reports light-vehicle sales for July. Expectations call for a seasonally adjusted annual rate of 15.3 million vehicles, versus 15.4 million in June.

The ISM releases its Services PMI for July. Consensus estimate is for a 60.8 reading, compared with June’s 60.1.

ADP releases its National Employment report for July. Consensus estimate is for a 635,000 gain in nonfarm private-sector employment, following an increase of 692,000 in June.

Thursday 8/5

Zillow Group,

Beyond Meat,

Yelp,

Wayfair, Kellogg,

Bayer,

HanesBrands, Moderna,

Regeneron Pharmaceuticals,

Switch,

Cushman & Wakefield,

ViacomCBS,

Cigna,

Duke Energy,

Square,

News Corp,

and

Siemens

are expected to report financial results.

Friday 8/6

The BLS releases the jobs reportfor July. Economists forecast a 800,000 rise in nonfarm payrolls, after an 850,000 gain in June. The unemployment rate is expected to edge down to 5.8% from 5.9%.

DraftKings,

Dominion Energy,

Gannett,

MGM Growth Properties,

AMC Networks,

Canopy Growth,

Tripadvisor,

Spectrum Brands Holdings,

E.W. Scripps,

Cinemark Holdings, and Manitowoc host conference calls to discuss financial results.

Write to Al Root at allen.root@dowjones.com