General Electric Raises Cash Flow Guidance

General Electric Company (Ticker Symbol: GE) released its quarterly earnings report that came in better than expected while raising its yearly guidance for cash flow. The company reported an earnings per share beat of .15 cents per share vs. Wall Street analysts’ estimates of .11 cents per share. Additionally, General Electric reported a revenue beat of $23.36 billion vs. Wall Street analysts’ expectations of $22.93 billion.

Industrial free cash flow shows the amount of money the company has left after paying for operating expenses and capital spending.  It is one of the most closely watched metrics by investors and General Electric reported $650 million in industrial free cash flow for the quarter.   The American multinational conglomerate also raised its forecast for its 2019 industrial free cash flow from flat ($0) to $2 billion up from a range between -$1 billion to $1 billion.

General Electric is still seeing weakness out of its power division, which reported quarterly revenue of $3.9 billion down from $4.6 billion. The company saw orders for its turbines and other power products fall by 30% for the quarter. The power division did have a $144 million loss, which improved greatly from the $676 million loss it reported this time a year ago.

The above image is a chart of General Electric’s stock since the beginning of 2019. The stock started off strong in the first quarter of 2019 coming off its lowest levels in nearly a decade.  General Electric gapped higher after its first-quarter earnings release and proceeded to rally more than 50% over the next few months before finding some price resistance right around its 200-day moving average. Over the next six months, General Electric was stuck in a horizontal channel trading between the prices of roughly $9.00 and $11.00 The stock broke out of its channel to the downside and began trading in a triangle consolidation pattern in the third and fourth quarters, which it eventually broke out to the upside.

Some traders use what’s called a “measured move” to try and project where the stock might go in the future based on breakouts from technical formations. In General Electric’s case, one would take the bottom price (widest point) from the triangle pattern (roughly $7.60) and the highest price of the top line from the pattern (roughly $9.60) then subtract them to get the difference ($2.00). The difference is then projected from the breakout point in the direction of the breakout to project the price of the measured move (Topline + Difference = Measured Move). In General Electric’s case, the projected price target from the triangle pattern was $11.60, which the stock has yet to achieve. Currently, the stock is trading above both its 100- and 200-day moving averages and if its triangle price target is reached it would put the stock at new highs for the year.

(Chart above courtesy of ​​)

Based on a survey of 13 analysts offering 12-month price targets, the average price target for General Electric’s stock is $11.00.  According to that number, the stock is priced right in-line with Wall Street’s analysts and could be considered at value around current levels near $11.03.

Investors in General Electric should look to their next earnings release on January 29th for fresh news within the company.

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