While GE's Q1 Print Reflects Coronavirus Impact, BofA Applauds Actions Taken To Preserve Liquidity

General Electric Company GE reported first-quarter earnings Wednesday that fell short of Street expectations.

Although the coronavirus pandemic affected the quarterly results and has impaired visibility, the company's steps to strengthen the balance sheet are encouraging, according to BofA Securities.

The GE Analyst

Andrew Obin maintained a Buy rating on General Electric with an $11 price target. 

The GE Thesis

General Electric’s free cash flow reflected a $1-billion drag from COVID-19, Obin said in a Wednesday note. (See his track record here.)

GE is taking actions to preserve the company’s cash, with more than $2 billion saved by lowering costs and over $1 billion saved from lower capital expenditure and working capital, the analyst said. 

General Electric reported adjusted earnings 5 cents per share, short of the Street’s forecast of 7 cents per share. Although GE Industrial’s organic revenue fell 5% year-over-year, this was better than BofA’s estimate of a 9% decline, he said.

The Power segment’s earnings were short, driven by lower revenue growth and weaker margins, Obin said. 

Despite revenue growth, the Renewable Energy segment recorded an earnings miss, mainly due to a  weaker margin, the analyst said, adding that health care delivered an earnings beat on the back of higher revenue growth and a stronger margin.

Aviation’s earnings were in-line, with lower-than-expected declines in revenue offset by weaker margins, Obin said. GE Capital delivered an earnings beat of 2 cents per share, with lower interest expense.

GE Price Action

Shares of General Electric were trading down by 1.62% at $6.69 at the time of publication.

Photo by Bubba73 via Wikimedia.