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Updated: October 30, 2019

GE's comeback gains momentum despite the trade war and 737 Max crisis

HBJ File Photo General Electric's former Fairfield headquarters.
By Matt Egan | CNN Business

General Electric is weathering a stormy environment better than feared, prompting the struggling conglomerate to boost its guidance.

Despite the US-China trade war and its exposure to the Boeing 737 Max crisis, GE posted adjusted profit and revenue on Wednesday that topped expectations.

The maker of jet engines, MRI machines and light bulbs also stopped burning through cash. GE generated $650 million of industrial free cash flow during the third quarter.

For the second quarter in a row, GE management felt confident enough to brighten its outlook. GE now expects to generate between zero and $2 billion of industrial free cash flow for 2019.

"We are encouraged by our strong backlog, organic growth, margin expansion, and positive cash trajectory amidst global macro uncertainty," GE CEO Larry Culp said in a statement.

Culp argued GE's results show continued progress in the company's "transformation" in the face of "external headwinds from the 737 MAX and tariffs."

Wall Street seems to agree, bidding GE's shares 7% higher in premarket trading.

GE recruited Culp a year ago to become the first outsider CEO in the company's history. He has moved with urgency to clean up GE's debt-riddled balance sheet by slashing the company's dividend to a penny and selling long-held businesses to raise cash. Culp has also promised to manage the business better, focusing particularly on the beleaguered Power business.

GE Power, the maker of systems for power plants, suffered another 30% decline in revenue during the quarter. The division has been hit hard by the shift away from fossil fuels in favor of renewable energy. However, GE Power's quarterly loss narrowed to $144 million and the company said it sees "signs of project stabilization and discipline."

GE, which has a joint venture that supplies engines to the grounded Boeing 737 Max, said it continues to work with Boeing to ensure the "timely and safe return to service" of the plane.

The quarterly report also provided another reminder of the questionable decision making that got the company into trouble in the first place. In recent years, GE made poorly timed acquisitions that have since gotten reversed to pay down debt.

GE recorded a pre-tax loss of $8.7 billion in discontinued operations to reflect its divorce from Baker Hughes, the oil-and-gas services giant. Even though GE only completed its acquisition of Baker Hughes in July 2017, the company needs cash to repair its balance sheet.

GE unloaded 144.1 million shares in Baker Hughes in September, raising $3 billion. That slashed GE's ownership stake to about 37%, down from 50.2% previously.

Likewise, GE took a $740 million non-cash goodwill charge during the quarter to reflect the deterioration of its hydro business.

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