General Electric reports smaller cash outflow, reaffirms 2021 outlook

General Electric saw less cash outflow than estimated in the first quarter even as its lucrative jet-engine business struggled with the pandemic-led collapse of air travel, driving down company revenue.

The company also reaffirmed its full-year free cash flow and earnings per share outlook. The reaffirmation, however, disappointed investors who were expecting an upgrade in-line with other multi-industry rivals that have raised their earnings forecast.

In a phone interview, Chief Executive Larry Culp said the company would update its outlook once it has a better idea how its aviation business would perform in the remainder of the year.

"What we really wanted to do today was to let people know we had a solid start the first quarter," he told Reuters. "Remind folks that we are very much on a path here to have a more focused, a simpler, stronger GE."

GE's shares, which have gained over 145% since last May, were down 3.8% at $13.06 in morning trade.

The Boston-based company reported a cash outflow of $845 million compared with an outflow of $2.2 billion last year. Analysts surveyed by Refinitiv, on average, expected a cash outflow of $1.3 billion.

The first quarter tends to be GE's slowest period of the year. However, improved earnings from a year ago and better working capital helped slow the cash burn.

The company expects a similar year-on-year improvement in cash flow in the current quarter.

Free-cash flow is closely watched by investors as a sign of the health of GE's operations and ability to pay down debt.

While the company sounded confident about hitting its free cash flow target for the year, its jet-engine business remains "an important swing factor."

The jet-engine business, usually GE's cash cow, is still reeling from the plunge in global air travel. The unit saw a 28% year-on-year decline in revenue in the latest quarter.

"We can see in China, we can see in the USA that when people are vaccinated and feeling better about things, those planes are in the air, people are in them," Culp said. "That's just not, unfortunately, a global phenomenon."

Adjusted earnings for the quarter came in at 3 cents per share, compared with 2 cents per share a year earlier. Revenue declined 12% on year to $17.12 billion.