A year ago, General Electric’s long-awaited turnaround seemed to be finally taking hold under chief executive Larry Culp. Then the COVID-19 pandemic hit, and Culp needed to break out the contingency plans.
For the most part, those efforts seemed to work: Boston-based GE wrapped up a challenging 2020 with surprisingly strong cash flow in its industrial businesses, perhaps the most-watched financial indicator at the company. Even JPMorgan Chase analyst Steve Tusa, who is often notoriously bearish about GE’s prospects, felt the need to compliment Culp and chief financial officer Carolina Dybeck Happe about the cash flow on their latest earnings call Tuesday.
That free-cash flow number totaled $4.4 billion for the final quarter, up 12 percent from a year earlier, vastly exceeding Wall Street’s expectations. However, total revenue fell 16 percent on a quarterly and annual basis from 2019, to $22 billion for the final three months and $80 billion for the year. Blame GE’s once-highflying Aviation division, which was brought to earth by the pandemic-induced slowdown in air travel.
GE’s stock closed up a modest 2.7 percent Tuesday, at $11.29 a share. It had climbed higher in morning trading after the latest quarterly earnings report came out. The fact that GE is back in the $11 range — essentially close to where it was a year ago — should count as a minor victory, considering it traded for half that amount in May. To longtime investors who remember much higher prices, however, the stock still has a ways to go.
Here’s how GE stands with its major industrial businesses, now that it has weathered the storm that was 2020:
Aviation: All eyes have been on GE’s Aviation business, a once-reliable profit center that ran into severe turbulence amid the grounding of so many commercial flights during the pandemic. Revenue fell 33 percent for the year, to $22 billion. But Aviation was still profitable, in no small part because of the decision in May to cut roughly 25 percent of its workforce. Those layoffs accounted for most of a 20,000-headcount reduction across the company in 2020. GE officials now expect the division’s revenue to be “flat to up” in 2021, assuming the recovery in the broader aviation industry accelerates in the second half of the year.
Healthcare: Revenue fell 10 percent in this division for the year, to $18 billion. But that’s largely because of the sale in the spring of GE’s biopharma business to Danaher, the company Culp used to run, for $21 billion. Look at GE’s remaining business lines in Healthcare, and revenue was up 4 percent, year over year. GE saw particularly strong demand for its Carescape R860 ventilator, a high-tech device marketed to hospitals to help them with an influx of COVID-19 patients.
Energy: GE breaks its energy businesses into two divisions, Power and Renewable Energy, that together generated about $33 billion in revenue last year. A slowdown in the natural gas market has weighed on Power for years, but GE is making headway there, with revenue flat in the final quarter compared to a year ago. In both divisions, orders soared as the year came to an end, a good indication of more revenue to come.
Among the most promising developments: GE has taken the lead in the offshore wind-energy race by developing the most powerful offshore turbine in the world, the Haliade-X. GE completed its first Haliade-X order in the last quarter. Judging from the interest in the industry, including with the developers of the Vineyard Wind project for Massachusetts, there will be many more to come.