NEW YORK: General Electric Co’s shares dropped sharply on Friday after it posted a 59-per cent decline in second-quarter profit and put off an expected cut to 2018 earnings targets until November, when new CEO John Flannery will be four months into his job.
The maker of power plants, jet engines, medical scanners and other industrial equipment said profit and sales declines largely reflected sale of its appliances business.
It beat analyst expectations on adjusted profit, but cash flow was weak and GE said full-year profit and cash flow will be at the low end of its forecasts.
GE also said it would update its 2018 earnings target of $2 a share in November, later than analysts had expected. Analyst consensus 2018 estimate is $1.73, according to Thomson Reuters I/B/E/S, already suggesting a significant cut.
The length and scope of the review raised concern, since GE has just come through major shifts in its portfolio.
“It’s discouraging that we’re going to wait again for the company to perform as we wait for the new CEO to review everything,” said Jim Corridore, analyst at research firm CFRA, which cut GE shares to “hold” after Friday’s results.
Incoming CEO Flannery acknowledged on a conference call that his review would take time, but said it had not altered GE’s 2017 outlook.
Still, the stock could be in “in a state of limbo” until the review is finished, Deane Dray, analyst at RBC Capital Markets, said in a note.
GE’s cash flow was below expectations and also weighed on the stock, said Jeff Windau, analyst at Edward Jones. “People want to get the answers sooner” to Flannery’s review.
Shares were down 3 per cent at $25.87 in mid-morning trading after earlier hitting a 2-year low.
GE faced a “slow-growth, volatile environment” in the quarter, Chief Executive Jeff Immelt said in his final earnings release before his August 1 retirement.
Immelt’s tenure began days before the September 11, 2001, terrorist attacks and included the 2008 financial crisis. While GE stock is 27 per cent below its price when Immelt arrived, it has more than tripled from its nadir in 2009.
Immelt sold off NBCUniversal, appliances and most of GE Capital. He acquired power assets from France’s Alstom, merged GE’s oil and gas business with Baker Hughes, and moved the headquarters to Boston.— Reuters
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