(Reuters) – General Electric Co (GE.N) quarterly profit and cash flow beat analysts’ estimates on Wednesday, boosted by its aviation unit, but the industrial conglomerate set a relatively modest profit target for 2020.

The results marked a fourth consecutive quarter that GE beat its own earnings and cash flow forecasts, reinforcing a view that Chief Executive Officer Larry Culp was progressing in turning around the ailing maker of jet engines, power plants, medical imaging equipment and other industrial goods.

Shares surged 6.9% to $12.54 in premarket trading.

GE said it expects to earn between 50 cents and 60 cents a share in 2020, less than the 66-cent forecast by analysts. It expects industrial free cash flow of $2 billion to $4 billion in 2020, bracketing the $3 billion analysts expect.

Adjusted earnings totaled 21 cents a share, topping analyst estimates of 18 cents, according to data from Refinitiv.

Free cash flow from industrial operations was $3.9 billion in the fourth quarter, beating analysts estimates of $3.4 billion, according to Refinitiv data.

GE’s cash flow typically surges in the fourth quarter as workers rush to ship units and book orders by year-end.

Culp has vowed to smooth cash more evenly across the year, but “the expectation was that this will still be an outsized cash flow quarter,” said RBC Capital Markets analyst Deane Dray.

While the results spurred the stock, it also showed Culp where there is room for improvement. In GE’s power division, revenue fell 16% in the year and orders fell 25%, mainly due to the “non-repeat” of large orders last year, GE said.

In aviation, GE’s largest unit by revenue, orders rose 3% and revenue rose 8% in the year. The unit was, ironically, helped by the grounding of Boeing Co’s (BA.N) 737 MAX. GE makes the engines for it, and sells that at little or no profit. Not delivering engines improves profit margins in aviation, analysts said.

GE generated $1.6 billion in free industrial cash flow for 2019, hitting its target of $0 to $2 billion. That total amounted to about two cents of cash for every dollar of its $88 billion in organic industrial revenue for the year.

Some of the gains came from less spending on restructuring. GE said on Wednesday it spent only $1.2 billion on restructuring, after originally planning to spend more than $2 billion.

“Technically, cash is getting better, but much of the gains come from reducing earlier guidance on costs,” said John Inch, analyst at Gordon Haskett in New York.

The premarket move in the stock mirrored what stock options had implied in recent days. Investors had expected a 5.4% stock move, in line with the average over the last 10 quarters, Dray said. That means they were not expecting fireworks from the earnings report, and that a lack of surprises would likely trigger a rally, he added.

GE’s total revenue fell about 1% to $26.24 billion.

Earnings from continuing operations attributable to GE shareholders rose to $663 million in the fourth quarter ended Dec. 31 from $509 million a year earlier.

Earnings per share from continuing operations rose to 7 cents from 6 cents, the company said.

Reporting by Rachit Vats in Bengaluru and Alwyn Scott in New York; Editing by Anil D’Silva and Bernadette Baum


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