General Electric (ticker: GE) experienced a notable increase in its stock price on Thursday. The positive news regarding cash and cash flow played a significant role in this upward trend.
Closing at $115.65, GE shares rose by 1.8%, marking the second-highest closing price within the last 12 months. (The highest closing price, $117.16, was recorded on July 25.)
While market conditions contributed to the stock's rise, credit is also due to management. Rahul Ghai, CFO of GE's aerospace business, delivered a speech at the Morgan Stanley Laguna Conference on Thursday.
Ghai stated, "As we sit here today, the Aerospace services continues to do well. Renewables and power are on track. So we think we are tracking to the higher end of our earnings per share and free cash flow guidance for the third quarter."
Analysts had projected third-quarter earnings per share to fall between 45 cents and 55 cents, with Wall Street anticipating 55 cents. However, analysts are already predicting figures at the upper end of the range.
Similarly, the forecast for third-quarter free cash flow was expected to remain flat compared to the previous year. In the third quarter of 2022, free cash flow reached approximately $1.2 billion. Current estimates by Wall Street project that free cash flow for the current quarter will be around $900 million.
Furthermore, there has been news regarding the upcoming spin-off of GE Vernova, GE's power generation businesses. Slated for early 2024, Vernova will commence operations with a surplus of cash compared to debt. GE aims for the business to obtain an investment-grade credit rating when it becomes an independent company, which is expected to provide additional support.
Following the spin-off, there will be three distinct entities: GE Aerospace led by Larry Culp, GE Vernova led by Scott Strazik, and GE HealthCare Technologies (GEHC) led by Peter Arduini. GE HealthCare is already a separate company, having completed its spin-off in early 2023.
Once the GE breakup is complete, all three remaining businesses are anticipated to possess investment-grade credit ratings and maintain strong franchises within their respective industries.