General Electric’s (NYSE:GE) headline fourth-quarter earnings and guidance were strong. They conclusively show that the conglomerate is not the hobbled, money-losing company that GE stock bears have told us it would be for years to come. Instead, it has become a vibrant, profitable enterprise whose results are poised to continue to rebound going forward. Consequently, I recommend continuing to buy GE stock.

GE reported Q4 earnings per share, excluding some items, of 21 cents, up 50% versus the same period a year earlier. Analysts’ average estimate was 18 cents.

The free cash flow of the company’s industrial businesses for the year came in at an impressive $2.3 billion. The company had provided industrial free cash flow guidance of $0 to $2 billion, which many GE stock bears had called overly optimistic.

In Q4, its industrial businesses generated cash of $3.88 billion. GE’s industrial revenue, excluding divested units, rose 4.6% YoY in Q4 and its industrial profit margin jumped 4.1 percentage points YoY to 11.3%. For the full year, its backlog jumped an impressive 15%

Even more bullish for GE stock was the company’s 2020 guidance for EPS, excluding some items, of 50 cents to 60 cents. Its outlook for industrial free cash flow was $2 billion to $4 billion, versus analysts’ average outlook of $1.2 billion.

Let’s examine the Q4 results and the outlook of all of the conglomerate’s main industrial businesses.

Aviation

Aviation’s backlog jumped 22% YoY and 8% versus Q3 to an incredible $273 billion. Its revenue , excluding acquisitions and divestments, rose 7% YoY, while its operating profit jumped 19% YoY. Its free cash flow for the year came in at $4.4 billion.

Driven by the likely resumption of production of the 737 MAX, continued strong demand for aeroderivative turbines, and the unit’s strong backlog, Aviation is well-positioned to continue to deliver strong, profitable growth going forward.

Power

The unit’s revenue was up less than 1% YoY, and it reported a $302 million profit, versus a $786 million loss during the same period a year earlier. Its profit came in at $302 million, versus a $786 million a year earlier. In 2019, it was #386 million in the black.

Power orders rose an impressive 23%, driven almost exclusively by its aeroderivative turbines which are powered by relatively light turbines and can provide grid-independent power to companies. Demand for aeroderivative turbines is likely growing rapidly and will continue to do so because electricity outages are becoming more frequent due to climate change.

It’s great for GE and GE stock that this unit, which had essentially been declared dead in the water by bears and even some bulls, was profitable in 2018. CEO Larry Culp said that the unit’s better-than-expected results were the key component of the company’s outperformance this year.

Gas Power continued to perform much better than most had expected. Its services orders jumped 12% YoY, excluding acquisitions and divestments. That was the highest growth of Gas Power services orders in 2019. Gas Power’s overall Q4 backlog jumped 3% YoY to an impressive $71 billion and its revenue, excluding acquisitions and divestments, jumped 9% YoY. It booked orders for 22 gas turbines that will generate 3.7 gigawatts of electricity. Natural gas and GE’s natural gas business are definitely not dying and should continue to grow significantly going forward.

Power’s backlog slumped 28% YoY, driven by the company’s failure to obtain the renewal of a steam equipment order and the non-renewal of a turnkey Gas Power deal. As a result of the latter development, Gas Power’s total orders fell 8% YoY.

Steam has been dragging on the unit’s results, and sounds like an antiquated technology. According to Bloomberg, the company is considering selling its steam business. Culp indicated that turnkey gas projects carry high risk. That may mean that they are not necessarily very profitable, so the company likely decided not to renew the deal.

Renewable Energy

In many ways, this unit’s headline performance was disappointing. But there were multiple green shoots under the surface, and Culp indicated that the unit was in the midst of a turnaround.

On the positive side, the unit’s revenue rose 4% YoY, excluding acquisitions and divestments. But its orders dropped 11% YoY and it lost $197 million, versus a $21 million loss during the same period a year earlier.

The company’s onshore wind unit performed well, as it booked record deliveries and pricing stabilized. Culp said that results improved throughout the year, as demand for its products jumped.

The company said that “execution issues, particularly in (the) Grid (business)” weighed on its results. It also mentioned that the failure to renew large, lapsed contracts for its Hydro and Grid businesses weighed on Renewables’ results. Finally, Culp said that the company continues to invest a great deal in developing Renewables’ offshore wind business.

The company is working to improve the Grid and Hydro businesses by reducing costs and improving their execution. Management is convinced that Renewables’ results will rebound going forward.

I think that surges in demand for the company’s offshore and onshore wind solution, along with cost reductions and improvements in Grid and Hydro, will result in marked improvements of Renewables’ performance by the end of the year.

Healthcare

The unit’s revenue and profit margin were flat YoY. But encouragingly, its orders rose 3% YoY, excluding acquisitions and divestments, led by a 10% gain by its Life Sciences unit.

Healthcare is being hurt by tariffs which should fade in the medium term. Culp indicated that Healthcare is getting more orders due to the coronavirus tragedy.

“As you might imagine, our Healthcare team is really in the smack in the middle of (the coronavirus outbreak) in Wuhan and elsewhere, servicing our equipment, certainly prioritizing new equipment deliveries, particularly to the Wuhan hospitals. And fortunately, we can be part of the solution there in China, but itself a real tragedy,” he stated.

I continue to believe that newer, faster equipment the unit has developed will improve its results in the longer term.

Bottom Line on GE Stock

Led by Power and Aviation, GE’s results rebounded a great deal in Q4, and its guidance was strong. In the months ahead, I believe that further improvements in Gas Power, Renewables, Aviation, and Healthcare will propel General Electric stock higher.

As of this writing, the author owned shares of GE stock.