What's going on?

General Electric (GE), one of the world�s biggest industrial conglomerates, reported earnings on Friday that appeared to beat Wall Street�s expectations � but its stock still fell over 2%…

What does this mean?

The good news was that GE made both more revenue and profit than expected. And an important measure of its sales, which excludes things like changes in currency values, was up 7% � an encouraging number given relatively slow global economic growth.


However, GE posted a much lower �cash flow� measure than what the market was expecting. Investors often use cash flow, which is literally the amount of money (in cash) that the company took in (or gave out) during the quarter, as a clean measure of a company�s performance (e.g. it doesn�t include complicated things like writing down the value of ageing equipment, which typically affects �profit�). GE said its weak cash flow was due to one-off factors, like the timing of customers� orders, and that it would even out later this year; but the big drop certainly gave investors pause for thought.

Why should I care?

For the markets: On the whole, it was a good day for industrial companies � and the economy.

Honeywell and Rockwell Collins, two other large manufacturers, both reported earnings that beat Wall Street�s expectations and saw their stock prices jump. Industrial companies are usually good bellwethers for economic growth as a whole, since, for one, they provide a lot of the equipment that other businesses use � and the signs from the first quarter appear to be, at the very least, decent.


The bigger picture: Global growth is accelerating, according to GE.

GE is active all over the world, and therefore has a worthwhile perspective on global economic growth. In the CEO�s view, the US continues to improve, and Asia, Latin America and Africa appear to be growing more strongly than last year � which is good news for the global economy.