General Electric Co. swung to a loss during the second quarter of 2019, but its outlook improved as it continued to restructure the company and right its troubled power division.
The company, which helps make engines for Boeing’s 737 Max planes, took a hit after the plane was grounded following two deadly crashes. GE lost $300 million in the first and second quarters of 2019 due to the groundings, and anticipates losing another $400 million per quarter in the second half of the year for as long as the groundings continue.
“We are at a lower level production than we thought we would be at this point in the year for obvious reasons,” CEO Larry Culp said in a conference call with investors.
GE executives said they expect to get paid for those engines eventually, when Boeing begins delivering the aircraft again.
Overall, GE lost $61 million across all its lines of business, or 3 cents per share, in the quarter. Adjusted earnings were 17 cents per share, beating analyst estimates of 12 cents per share, according to analysts polled by FactSet.
Revenue slipped 1% to $28.83 billion.
“We made progress that we are encouraged about in the first half of the year,” Culp said. “But it’s early and a multiyear transformation. This is undoubtedly a game of inches”
The company’s long-struggling power business, which includes its gas turbines, posted a profit of $117 million, down 71% from the same time last year. The team continues to focus on reducing cost and improving operations.
“As we see the transition from coal and nuclear to other sources, cleaner, more efficient sources, gas is a beneficiary in that,” Culp said, adding that GE is making sure it’s plugged in country by country and customer by customer to be a part of that transition.
In renewable energy, which includes GE’s onshore and offshore wind energy business, orders were up 35% and revenues rose 26% to $3.6 billion. But the segment lost $184 million, due to higher losses on legacy contracts, challenging onshore project execution in Asia Pacific, research and development investments and tariffs.
Culp said GE is doing some work investing in battery storage, but the main way the company is positioning itself for the energy transition from fossil fuels to renewables is by investing in its onshore and offshore wind business and making sure GE has a best-in-class gas business.
In aviation, orders were down 10%, and profits were down 6% to $1.4 billion.
GE’s outlook for the full year of 2019 improved, with the company expecting adjusted earnings per share of 55 to 65 cents, up from 50 to 60 cents. It’s also expecting adjusted free cash flows of -$1 billion to $1 billion, up from the prior estimate of -$2 billion to zero.