New GE Chief Slashes Forecasts, Plans to Exit $20 Billion in Businesses -- 2nd Update
October 20 2017 - 8:22AM
Dow Jones News
By Thomas Gryta and Cara Lombardo
General Electric Co. slashed its 2017 projections as new Chief
Executive John Flannery's started to outline his restructuring
plans, setting a goal to exit more than $20 billion of the
struggling conglomerate's businesses.
Mr. Flannery, who came into the job in August and recently
became chairman with the early exit of Jeff Immelt, has expressed
an urgency to reduce costs and rethink the sprawling company. In
addition to lowering earnings targets, the company Friday cut its
forecast for 2017 cash flow by half from a July projection.
GE shares dropped 6% in premarket trading Friday after closing
Thursday at $23.58. The stock had fallen 25% this year.
The Boston company's third quarter earnings fell as it incurred
hefty restructuring charges, reporting a profit of $1.8 billion,
down from $2 billion a year earlier. Excluding restructuring
charges and other items, adjusted per-share earnings fell to 29
cents from 32 cents, still well below Wall Street expectations of
49 cents.
Impairments and restructuring charges during the period dented
GE's per-share earnings by 16 cents.
Mr. Flannery is slated to update investors at a Nov. 13 meeting
on the details of his strategic review. He has already been cutting
jobs, research operations and executive perks, like corporate
jets.
In a presentation accompanying Friday's results, GE said it is
looking to streamline its portfolio of businesses by more than $20
billion in the next 1 to 2 years, without providing details.
The company lowered its adjusted 2017 per share profit target to
$1.05-$1.10 from a previous view of $1.60-$1.70. Analysts currently
expect earnings of $1.53 a share in 2017.
Cash flow from operating activities is now projected to be about
$7 billion, a steep revision from the previous view of $12 billion
to $14 billion, with a big part of the drop coming from the power
division.
GE is ahead of its goal to cut $1 billion in industrial costs
this year, cutting $500 million in the third quarter and hitting
$1.2 billion for the year so far. Earlier this year, GE set a goal
to cut $1 billion in such costs this year and next, under pressure
from activist investor Trian Fund Management, which recently gained
a seat on the company's board.
"This was a very challenging quarter," Mr. Flannery said in a
statement. "We are focused on redefining our culture, running our
businesses better, and reducing our complexity."
He has already called on company leaders to review their
divisions and plans to streamline the company's global research
efforts, which could include shutting down research centers in
Shanghai, Munich and Rio de Janeiro, people familiar with the
matter have said.
GE's revenue jumped 14% to $33.5 billion in its third quarter,
up from $29.3 billion a year earlier. Analysts had expected revenue
of $32.56 billion, boosted by a merger of GE's oil-and-gas unit
with Baker Hughes.
Oil-and-gas revenue rose 81% from a year ago driven by Baker
Hughes; without the new assets, revenue fell 7%. Revenue growth was
mixed with aviation and health care businesses expanding, but
power, lighting and transportation all shrinking. Transportation
revenues dropped 14%.
Write to Thomas Gryta at thomas.gryta@wsj.com and Cara Lombardo
at cara.lombardo@wsj.com
(END) Dow Jones Newswires
October 20, 2017 08:07 ET (12:07 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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