General Electric Co. (NYSE: GE) stood out in the markets Thursday after promising that its earnings would reset this year and improve starting next year, but it was not enough of a catalyst to stimulate industrial sector-related exchange traded funds.
On Thursday, the Industrial Select Sector SPDR (NYSEArca: XLI) down 0.3% and Vanguard Industrials ETF (NYSEArca: VIS) was 0.4% lower.
Among the major components in the industrial sector, General Electric shares jumped 2.8% on Thursday. GE makes up 3.9% of XLI’s underlying holdings and 3.1% of VIS. GE was also one of the few industrial ETF components that were in the green on Thursday.
GE shares strengthened after the company promised that earning would improve in 2020 and beyond after a difficult “reset” period over 2019, Reuters reports.
Chief Executive Officer Larry Culp revealed GE will invest $2.5 billion in restructuring that will yield results next year.
“This is what constitutes a reset,” Culp said on a conference call.
GE Profit Warning
The multinational conglomerate, though, warned that 2019 adjusted profit will dip below analyst estimates and could lose as much as $2 billion in cash from its industrial businesses over 2019.
The company also refrained from mentioning a potential hit to its jet engine division after the recent global grounding of Boeing Co 737 MAX aircrafts in response to a crash of an Ethiopian Airlines flight on Sunday.
Looking ahead, Culp outlined the company’s priorities of trimming debt and improving the performance of its industrial businesses, especially its faltering power-plant division. GE’s free cash flow at power will remain negative in 2020 but turn positive in 2021. Furthermore, adjusted free cash flow for all industrial businesses should around break even and negative $2 billion before turning positive in 2020.
That outlook is “arguably better than expected,” Deane Dray, an analyst at RBC Capital Markets, told Reuters.
For more information on the industrial sector, visit our industrial category.
