(Adds Breakingviews link, closing share price)By Alwyn Scott and Rachit VatsApril 30 (Reuters) - General Electric Co said onTuesday it generated more profit and lost less cash thanexpected in the first quarter, suggesting an improving outlookunder its new leader that sent its shares and bonds higher.New Chief Executive Larry Culp cautioned, however, that theresults stemmed largely from the timing of payments to suppliersand from customers, and did not alter GE's financial outlook forthe year."One quarter is a data point not a trend," Culp said on aconference call with analysts.
GE's profit from continuing operations more than tripled assales rose in GE's aviation, oil and gas, and healthcare units.At the same time, negative cash flow from industrial businesswas $1.2 billion, much less than the $2.16 billion outflow thatanalysts, on average, were expecting.Culp had set low earnings targets in March and warned thatGE's industrial cash flow could be negative by as much as $2billion. GE's shares rose 4.5% to close at $10.17, after the call.They had risen more than 10% before the market opened.GE bonds also rallied, extending a recovery in more than$100 billion of GE debt. Yields on dozens of longer-dated issueswere at their lowest since Nov. 1. A $1 billion GE Capital bondwith a 4% coupon due in July 2035 was up more than1.5 cents at nearly 87 cents and a yield of 5.2%, compared witha low of 63 cents on the dollar last November to yield more than8%.Investors have been keen for a turnaround since GE namedCulp last October to restore earnings and improve a stock pricethat has fallen by more than two-thirds since 2016.
GE took a string of multibillion-dollar writedowns lastyear, so the slowing in cash outflows in the latest quarterraised hopes that its fortunes have started to improve.
GE's industrial free cash flow showed a "much smalleroutflow than we expected," said Julian Mitchell, an analyst atBarclays, and "should drive a positive reaction in the stock."But while the Boston-based conglomerate stuck to itsfull-year financial forecast, it noted "new risk" from BoeingCo's 737 MAX jet, for which GE engines with partnerSafran SA of France. The plane model was groundedworldwide last month after a second fatal accident in less thanfive months.
Profit margins also contracted at GE's aviation, power andrenewable energy businesses, the three core units that GE plansto retain as it undergoes a break-up announced last year.
A 1.6 percentage point drop in GE's industrial margins inthe quarter is a "stark reminder of the challenges that thecompany still faces," said Rene Lipsch, lead GE analyst atMoody's. He added that he expects margins to be flat or slightlyimproved by year-end.GE's cash balance was boosted mainly the $2.9 billion saleof locomotive business to Wabtec Corp .Culp has said the 2019 "reset" of GE would result innegative cash flow at its most-troubled business, power, through2020 before turning positive in 2021. GE wrote down $22 billionin goodwill at the unit last year. In the latest quarter, power orders fell 14% and profit fell71% to $80 million on revenue of $5.7 billion, down about 22%from a year earlier, GE said.Some saw signs that the power unit's prospects will improve."This was a business that everyone gave up as dead ... but (it)is more than able to fend for itself," William Blair & Coanalyst Nicholas Heymann told Reuters.Earnings from continuing operations attributable to GEshareholders rose to $954 million in the first quarter endedMarch 31 from $261 million a year earlier.
On an adjusted basis, GE earned 14 cents per share. Analystshad expected 9 cents per share, on average.
Total revenue fell 2% to $27.29 billion, above analysts'average estimate of $27.05 billion.<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Wall St Week Ahead-Industrials' gains put to test as earningsramp up CORRECTED-BREAKINGVIEWS-GE's decent quarter won't stop theshrink General Electric CEO sets low 2019 profit targets, vows better2020 General Electric reveals deeper regulatory probe, restructuring GE seeks better insurance returns in junk bonds, other riskassets GE's CEO warns of negative industrial cash flow in 2019, sharesdrop General Electric's modest gains, candor spark 'relief rally' ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Dan Burns in New York; Editing by BillRigby, Nick Zieminski and Richard Chang)
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