(Adds details from GE, analyst comment, updates share price)By Alwyn Scott and SanjanaShivdasMarch 14 (Reuters) - General Electric Co ChiefExecutive Larry Culp on Thursday set conservative profit targetsfor this year and staked his reputation on hitting them anddoing better in 2020 and beyond, igniting a rally in the stock.Culp's detailed pep talk, which drew praise from Wall Streetanalysts on a conference call, swiftly reversed an earlier routin the stock as he stressed GE was serious about its targetsafter years of missing profit expectations.The forecast was low largely because GE will be spending$2.5 billion on restructuring this year, Culp said, adding theinvestment would pay off after a tough 2019."This is what constitutes a 'reset,'" Culp said, using aword many analysts had longed to hear.
"The market should interpret a high level of conviction (inthe forecast) simply because this team, in a public forum, islaying this roadmap out, mindful of the realities of 2019 but Ithink also optimistic ... about the impact of what we're doing."Culp did not soft-pedal the short-term pain. He said 2019adjusted profit would be 50 cents to 60 cents a share, belowanalyst estimates of 70 cents, and GE could lose as much as $2billion in cash from its industrial businesses, putting a numberon a warning he issued last week. The company expects free cash flow at GE Power to remainnegative in 2020 before turning positive in 2021.
Investors are looking closely at GE's cash and earningsafter the company lost nearly $23 billion last year. The outlook is "arguably better than expected," said DeaneDray, an analyst at RBC Capital Markets.
The company did not make reference to any potential hit toits jet engine unit from the recent global grounding of BoeingCo's 737 MAX aircraft. GE and partner SafranSA make the engine that powers all 737 MAX planes.GE shares were up 2.9 percent at $10.31 in afternoontrading, after falling 4 percent in premarket activity shortlyafter the forecast was released. GE bonds also rose slightly."While lowered guidance is not a positive, we think GE'splan and progress show it's moving in the right direction," saidJim Corridore, analyst at CFRA.Culp also left considerable wiggle room in the forecast byincluding an unspecified amount of "contingency" money to coverhard-to-predict costs, such as when it will conclude big assetsales and how its power unit will perform.JPMorgan analyst Stephen Tusa voiced concern that the gapbetween GE's cash flow and earnings forecasts was the widest hehad seen, which likely will mean analysts' profit estimates aretoo high.Culp said that although GE was taking "a safe conservativeposture in this reset year ... Rest assured, operationally,we're running hard."<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^BREAKINGVIEWS-Larry Culp struggles to get new GE off the ground ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Rachit Vats in Bengaluru and KateDuguid in New York; Editing by James Emmanuel and BernadetteBaum)
Messaging: alwyn.scott.thomsonreuters.com@reuters.net)) Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.