General Electric shares rose in premarket trading as CEO Larry Culp gave investors on Thursday an upbeat long term outlook on the company’s struggling power business.
“We will have a greater level of negative cash flow in [the power] business this year,” Culp told CNBC’s Morgan Brennan.
GE’s power business saw negative cash flow of $2.7 billion in 2018 and Culp warned that “it will be worse” in 2019. But it’s “game on” this year, Culp said, as he aims to get things back on track.
“From there will get significantly better in 2020, and we expect positive free cash flow in 2021,” Culp said.
GE shares rose 3.4 percent in premarket trading.
At the core of GE’s two-year stock fall is the company’s failure to forecast a downturn in demand for its turbines, the titanic machinery that powers natural gas and coal-fired power plants. GE ended up with little demand for power plant equipment. GE forecasts the market for gas-powered turbines will remain stagnant through 2020.
“Power is in a serious turnaround mode. This is not going to be quick, by any stretch,” Culp said on the company’s conference call on Thursday.
GE power was also hit by an issue with the next generation turbines the company had recently put into the field. While the an oxidization issue “created cracking” in the turbines, Culp said last week that GE has now “upgraded about 23 of the 33” turbines in operation.
Even as the business continues to struggle, Culp pointed to the years ahead. GE said in its outlook that power will be “significant better but negative” in 2020.
