Financial Performance

GE Improves Cash Flow But Loses $10B in Q4

The company also discloses an SEC investigation of the $6.2 billion charge it took for its long-term care insurance business.
Matthew HellerJanuary 24, 2018

General Electric’s cash performance in the fourth quarter eased concerns about its liquidity but the company reported another earnings miss and disclosed its accounting practices were under investigation.

In a news release, GE Chief Executive John Flannery on Wednesday touted the fourth-quarter results as evidence of the “early progress we are seeing from our key initiatives” to improve performance, including deep cost cuts.

The company’s cash position had become such a concern that in November, it slashed its quarterly dividend by 50%. For the three months ended Dec. 31, GE’s industrial businesses generated adjusted cash flow of $7.76 billion, down 6% from the year-ago period.

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Cash flow, Flannery told analysts, was one of the “green shoots” starting to emerge as GE tries to reverse a slide that has seen its share price decline by more than 44% over the past year.

In trading Wednesday, the stock initially rose nearly 4% to $17.26 before falling back to close at $16.44, down 2.6%.

The fourth-quarter results illustrate “how far [GE] has fallen, and the steep hill the company — once a titan of American industry — must climb to turn itself around,” The New York Times said.

The conglomerate swung to a loss from continuing operations of $10.01 billion, or $1.15 per share, from a profit of $3.48 billion, or 39 cents per share, a year ago, reflecting in part a $6.2 billion charge due to far higher-than expected costs in in its long-term care insurance business.

Excluding one-time items, GE earned 27 cents per share on revenue of $31.4 billion. But analysts had expected earnings of 29 cents on revenue of $34.06 billion. The power business continued to struggle, with sales falling 15% and operating profit down 88% to just $260 million.

Additionally, CFO Jamie Miller disclosed that the U.S. Securities and Exchange Commission is investigating the process that led to the fourth-quarter charge and to GE increasing its insurance reserve.

“These things are further risks that make GE difficult to value,” said UBS analyst Steven Winoker. “They have to right the ship.”