GE posts higher quarterly profit and positive cash flow

General Electric on Tuesday Jul. 26 surprised Wall Street with higher quarterly profit and positive cash flow as recovery in the aviation industry propelled its jet engine business, sending its shares higher.

The Boston-based industrial conglomerate, however, said it was still grappling with supply-chain disruptions and inflationary pressures, which would pressure earnings this as well as next year.

“It is a challenging operating environment,” Chief Executive Larry Culp told Reuters in an interview.

Supply-chain bottlenecks have made it tougher for the company to deliver products to customers on time. To get around the problem, it is holding higher levels of inventory.

GE said supply-chain and macroeconomic pressures shaved off 5 percentage points from its revenue in the quarter through June.

It reiterated that its full-year results this year were on track to hit the low end of its forecast, but trimmed the full-year free cash flow forecast by about $1 billion.

In January, it projected adjusted profit in 2022 to be in the range of $2.80 to $3.50 per share and expected to generate $5.5 billion to $6.5 billion in free cash flow.

Culp said a “more conservative view” on part of the company was warranted due to economic and policy uncertainties.

GE expects demand at its aviation unit to remain strong, resulting in more than 20% revenue growth and $3.8 to $4.3 billion operating profit this year.