GE, General Electric, 2017

General Electric’s first-quarter revenue and adjusted earnings beat analysts’ estimates but a miss on industrial cash flow helped drive its stock down.

GE’s Chief Executive Jeff Immelt called it a “strong start” to the year, citing 7% growth in organic revenues, 10% growth in orders and an increase of 130 basis points in industrial operating margin. He also said GE was on course to meet its guidance for 2017 and would execute a $2 billion cost-cutting program in 2017 and 2018.

For the first quarter, revenue fell 1% to $27.66 billion, due to lower sales in GE’s oil-and-gas and lighting businesses, while adjusted earnings of 21 cents a share were unchanged from a year ago.

Analysts had forecast earnings of 17 cents a share on revenue of $26.26 billion. But in trading Friday, GE shares fell 2.4% to $29.55, in large part because the company reported a negative $1.6 billion in cash flow from industrial operating activities compared with the negative $600 million it had expected.

“There was immediate disappointment that cash came in low,” Deane Dray, an analyst at RBC Capital Markets, told Reuters.

GE said the lack of cash flow was primarily due to accounts receivable collection issues in the aviation and power segments.

“We didn’t collect on a number of accounts in the quarter that we expected to,” CFO Jeffrey Bornstein said on a conference call. “In aviation, which historically has not had issues with past dues, we missed by about $200 million on five customer accounts, which will clear in the second quarter with no issue.”

“In power, we didn’t collect on several delinquent accounts in top regions around the world, but we expect to collect these throughout the rest of the year, including in the second quarter,” he added.

Immelt told analysts that “The goals for industrial operating profit and structural cost-out are in sight. Despite a slow start, we plan to hit $12 billion to $14 billion of industrial CFOA for the year.”

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