Shares of General Electric surged more than 13% on Friday to its highest level in three months - in spite of falling short of earnings estimates. The latest report did confirm, however, that the company is on track for much needed progress. GE's power business has been struggling for some time now with stock declining on earnings in the past 11 out of 13 quarters.
GE’s CEO Larry Culp is positive that the company will make substantial progress in the coming months, but for now there will be some residual effects from non-operational headwinds related to legal settlements and legacy project erosion. Further, GE’s cash flow may also be affected by restructuring and investments in health-care, but Culp assured shareholders that these are just one-time items, which in the long run will cool off.
To buttress Culp’s optimism, analysts claim that whatever challenges the power business is facing today, GE is making a realistic assessment and tailoring a solution. For example, the company has cut 10,000 power jobs, or 15% of that unit’s workforce, reducing its footprint by 30% and taking out $900 million of base costs.
Because of these realistic arrangements, analysts have reasonably raised the price target from $11 to $13, citing the company’s progress in the latest report.