General Electric (GE 0.34%) forecasted negative free cash flow for the full year this week. The new CEO, Larry Culp, took over the company's sprawling asset portfolio 18 months ago, and still has work to do.
The balance sheet concerns have been mitigated by a sale of GE's healthcare unit. Regardless this year's expected free cash flow burn, proceeds from that sale raised the company's liquidity position by over 20% during Culp's first year on the job. Free cash will be further aided by the recently announced sale of its lighting business as well.
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Big Challenge Remaining
GE's aviation unit is the root of the cash burn problem. The daunting combination of a pandemic and 737 Max grounding (GE makes part of the engine) removes a cash generating machine for General Electric while the pandemic limits aviation business elsewhere. Boeing's issues are the biggest piece of the cash burn puzzle for GE
Good news may finally be on the way for Culp. All airlines are reporting a significant bottoming in domestic and global travel.
GE profitability concerns still loom, but asset sales ensure company stability while Culp revamps his company and the 737 Max gets back in the air. Today the stock is pressured due to news on cash losses in the near term.
