General Electric forecasts a significant hit to free cash flow and operating profit in Q1 due to the Coronavirus outbreak

on Mar 4, 2020
Updated: Apr 16, 2020
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  • General Electric forecasts a significant hit to free cash flow and operating profit in Q1 due to the Coronavirus outbreak.
  • General Electric expects a $300 million to $500 million hit to free cash flow in the first quarter.
  • General Electric estimates a $200 million to $300 million hit to operating profit in the first quarter.

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General Electric (GE) is the latest addition to the list of companies that have anticipated a hit to its financial performance due to the rising complications of Coronavirus. On Wednesday, General Electric expressed confidence that it will hit its targets for cash and profit in fiscal 2020. Its outlook for the current quarter (Q1), however, was more dovish as the company expected a $300 million to as much as $500 million hit to its cash flow in the first quarter.

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Owing to its production houses and widespread business operations in China, GE currently has thousands of workers in the country. Following the downbeat guidance for the fiscal first quarter, GE was seen trading 2% down in the stock market in premarket trading on Wednesday.

General Electric’s Performance In The Stock Market

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At the time of writing, GE is exchanging hands at around $11 per share in the stock market that marks an almost 10% decline in 2020 so far. Its performance in 2019, on the contrary, remained largely upbeat with an annual gain of around $40. The stock opened at around $8 per share in January 2019 but closed the year at a much higher $11.16 in December. General Electric is currently valued at $95.09 billion.

CEO Larry Culp is currently working committedly to restructure General Electric and pull it out of a constant stream of failures. Last month, Culp forecast GE’s free cash flow in the first quarter to hit a negative $2 billion. Culp attributed the dovish forecast to Boeing’s decision of temporarily halting production of 737 MAX jetliner that remains grounded after two fatal crashes that killed 346 people.

General Electric Aspires To Make 50 To 60 Cents Of Earnings Per Share In Fiscal 2020

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The CEO, however, expressed confidence that the company would recover its free cash flow to positive $2 billion to even $4 billion in fiscal 2020. He also anticipated 50 cents to 60 cents of adjusted earnings per share this year. Experts, on the other hand, forecast a positive $2.77 billion in free cash flow for GE in 2020.

In terms of operating profit, GE said that the health emergency in China is likely to fuel a $200 million to $300 million hit in Q1.

The impact of the Coronavirus outbreak on the global economy is evident from the Reserve Bank of Australia and the U.S Federal Reserve’s decision of cutting rates to add fiscal stimulus for economic growth on Tuesday.

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