Here's what the best GE analyst is saying to do with the stock before earnings

Published Tue, Jan 28 202011:17 AM ESTUpdated Tue, Jan 28 20204:03 PM EST

Michael Sheetz @in/michaeljsheetz @thesheetztweetz

(This story is for CNBC PRO subscribers only.) General Electric will report its fourth-quarter earnings on Wednesday before the bell and the top industrials analyst on Wall Street broke down what investors should expect. J.P. Morgan analyst Stephen Tusa explained the importance of this report for shareholders, as GE should provide its 2020 forecast for free cash flow in the year ahead – a metric that is closely watched by investors. Additionally, unpacking the "moving parts" of the impacts on GE from Boeing's 737 Max crisis "will be a key factor." GE rose 2.5% on Tuesday to close at $11.73 a share. J.P. Morgan has a sell rating on GE with a $5 price target. What to look for from GE's forecast The embattled industrial company's 2020 forecast will be closely watched. Especially since, according to Tusa, "it's unclear how and with what format 2020 guidance will be set." But he does expect the company to provide guidance for free cash flow (FCF) – a financial measure that's often used as a gauge of efficiency – and sees its coming in around $3 billion for 2020. Tusa believes the next six months will be key to understanding what "normalized earnings/FCF levels" for GE will look like in 2021, as well. "This year is the bridge for a consensus we see at $6 B for FY21, and a Bull case of $7 B+," Tusa said. 'Aviation will be noisy' A standout among GE's businesses should be its aviation unit, Tusa said, which "will be noisy." That's largely due to the ongoing Boeing 737 Max crisis, as GE Aviation manufactures the LEAP engines used for the jet. GE last year said it expected to lose about $1.4 billion from delays in aircraft engine production. Tusa doesn't expect that to improve much, if at all, in 2020. "We continue to see the $1.4 B initially talked about by management as overstating the all-encompassing FCF impact from MAX (i.e., no flip positive expected)," Tusa said. Additionally, in the "already slowing" market for air travel and air cargo, Tusa warned "there is also a question about the impact from risk to air travel demand from the coronavirus" outbreak. As of Tuesday morning, Chinese health authorities said coronavirus has killed 106 and infected 4,515 people. GE power a 'blind spot' Finally, Tusa expects to see GE's long struggling power business to remain subdued, even as "most expect Power to continue to show recovery." Tusa noted that the year-over-year comparison for power's performance "will be heavily influenced by charges" GE took last year. That makes it difficult "to draw a conclusion from the trend line of results," he added. "On this basis, Power is probably the biggest blind spot," Tusa said. – CNBC's Michael Bloom contributed to this report.

Larry Culp, CEO, General Electric

Scott Mlyn | CNBC

(This story is for CNBC PRO subscribers only.)

General Electric will report its fourth-quarter earnings on Wednesday before the bell and the top industrials analyst on Wall Street broke down what investors should expect.

J.P. Morgan analyst Stephen Tusa explained the importance of this report for shareholders, as GE should provide its 2020 forecast for free cash flow in the year ahead – a metric that is closely watched by investors. Additionally, unpacking the "moving parts" of the impacts on GE from Boeing's 737 Max crisis "will be a key factor."