General Electric (GE) – Get Report shares moved higher Tuesday after the industrial group said it would cut its debt by around $14.5 billion this year and repeated its aim of turning cash-flow positive in 2021.
General Electric said it has pre-funded $2.5 billion in minimum pension payments for the next three years and repaid a $1.5 billion loan to GE Capital, in transactions completed earlier this week. Collectively, the company expects to reduce debt for the 2020 year by around $14.5 billion — including $9.6 billion in GE Industrial debt and $4.9 billion in GE Capital debt — and by approximately $28 billion since the beginning of 2019.
The group also repeated its forecast of industrial free-cash flow in the region of $2.5 billion for this quarter, as well as its ambition of turning cash-flow positive in the coming year
“With these balance sheet actions, along with the series of proactive actions we’ve taken this year, we continue to execute on our commitment to solidify GE’s financial position,” said CEO Larry Culp. “With line of sight to at least $2.5 billion of Industrial free cash flow in the fourth quarter and positive free cash flow in 2021, these steps further reduce debt, de-risk our balance sheet, and put us on stronger financial footing to accelerate GE’s transformation. We remain committed to maintaining elevated liquidity amid an uncertain environment and achieving our leverage goals over time.”
GE shares were marked 1.6% higher in pre-market trading Tuesday to indicate an opening bell price of $11.03 each, a move that extends the stock’s six-month gain to around 30.4%.
Last month, Oppenheimer analyst Christopher Glynn set a $12 price target for GE stock after boosting his rating to ‘outperform’ in a research note that highlighted changes under Culp’s tenure, including a stronger balance sheet and improving industrial free cash flows.
Glynn also noted that GE’s sale of its BioPharma division to Danaher Corp. DHR, which closed in March, has helped reduce overall debt by around $13.3 billion, with near-term liquidity allowing for the funding of pension obligations or the retirement of preferred stock.