par John R. Fischer
, Senior Reporter | April 10, 2020
The impact of the COVID-19 pandemic has left General Electric uncertain about certain aspects of its financial future, questioning how long and how fast the recovery process will take, and the impact it will have across its operations.
The multinational corporation has withdrawn its financial guidance for 2020 due to the uncertainty created by the virus. Previously reporting in March that adjusted earnings per share (EPS) for the first quarter of 2020 were expected to be about $0.10, the company now expects it to be materially below this figure.
It is, however, preliminarily anticipating Industrial free cash flow to be close to its prior guidance of about negative $2 billion, with support partially provided by the completion of the sale of its BioPharma business to Danaher Corporation.
“We are taking swift actions across the company to position GE to come out stronger on the other side of the COVID-19 crisis,” said GE chairman and CEO H. Lawrence Culp Jr. in a statement. “With net proceeds of about $20 billion from the BioPharma transaction now in hand, we have more flexibility to de-risk and further strengthen our balance sheet. We are committed to bringing down our leverage over time as we navigate this period of uncertainty and position ourselves for the future.”
Shares in GE fell by 2.3% Thursday, following a downgrade from CFRA analyst Colin Scarola. This reversed earlier gains during the week, including a 3.8% boost gained on Wednesday when the company released its financial guidance and first quarter performance update. Its stock is now trading down 36% year-to-date versus 17% for the Dow Jones Industrial Average, according to Yahoo Finance
Despite the cash burn we expect in 2020, our lower rating is ultimately due to a highly uncertain outlook for GE’s balance sheet and earning power in 2021 and beyond” said Scarola in a statement.
Since the outbreak, the company’s healthcare division, GE Healthcare has taken a number of steps to help end the pandemic as fast as possible and quell its potential impact, including ramping up ventilator production to a round-the-clock schedule
to help meet increasing demands from hospitals and governments worldwide, as they work to treat patients infected by the coronavirus.
It also recently teamed up with Ford to produce 50,000 ventilators within 100 days
and 30,000 a month thereafter, licensing an existing ventilator design from Airon Corp., a small, private company specializing in ventilators and other high-tech pneumatic life support products.
“Our deep understanding of the healthcare industry with Ford’s supply chain and production expertise will help meet the unprecedented demand for medical equipment,” said GE Healthcare president and CEO Kieran Murphy in a statement. “We continue to be encouraged by how quickly companies are coming together in innovative ways to address this collective challenge.”
Non-cash and time items in aviation, renewable energy and GE capital brought total company-adjusted EPS down more than industrial free cash flow. GE Aviation plans to reduce about 10% of its U.S. workforce and its CEO, David Joyce, has already taken a salary cut of half his original. The company also expects a “lack of work” for about half of its U.S. maintenance, repair and overhaul employees for 90 days, according to The Street
GE plans to hold its first-quarter earnings call at 8 a.m. ET on Wednesday, April 29. It will share additional details during the call.