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General Electric (GE) Analysis |
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| Posted: 2018-Oct-22 23:51 by Vertex |
Larry Culp, who won Wall Street’s praise for transforming manufacturer Danaher Corp. into an engine of value production for investors, takes over immediately amid one of the deepest slumps in GE’s 126-year-old history. In addition to the change in leadership, the firm announced it will write down about $23 billion of goodwill associated with the power segment. The impairment charge is the latest setback for the struggling power unit, which has grappled with falling demand for gas turbines, declining market share and, recently, technical problems with its flagship turbine product. The GE Power subsidiary accounts for about 30 percent of its $122 billion in annual sales. Analysts have been bracing for a writedown after outgoing CEO John Flannery acknowledged that the power assets acquired from Alstom SA in 2015 weren’t performing as expected. Jefferey Immelt - who ran GE until 2017 - pushed through the $10 billion deal just as the market started to turn. The stock has fallen 35 percent this year through Sept. 28 after tumbling 45 percent in 2017. It does not help that GE was expelled in June of this year from the Dow Jones Industrial Average. In total the firm has lost half a trillion dollars in market value since the peak in 2000. S&P Global Ratings recently slashed its rating on GE’s long-term debt by two notches, and Moody’s Investors Service said it might do the same following the company’s lowered guidance. “The latest news on power performance has led us to revise down our view of GE’s aggregate competitive positioning, with solid performance in aviation and health care further overshadowed by weakness in the power segment,” S&P said. Culp, 55, becomes the first outsider to be made chairman and chief executive of GE since Thomas Edison co-founded the firm 126 years ago. According to the Wall Street Journal, Culp is planning to continue on with plans to sell off the GE healthcare unit and a few other assets to raise cash. It was elsewhere reported that the firm still has $27 billion of revolvers and $13 billion of back-up lines available for Culp to right his new ship. Hindsight is always 20/20 and it was hard for many to envision some of the changes that hit GE. The global shift to renewables has been swifter than many imagined, which has hurt the power business. The global financial crisis hurt the GE Finance subsidiary pretty bad, as it did many others. I personally wouldn't have considered it prudent to use my A-1 rated issuing capacity to purchase a junk mortgage lender, but I wasn't granted a $600b market cap to manage either. GE is a big enterprise. That bigness forces choices and not all of them are easy. The $23b writedown is also big, but it creates a new accounting baseline. Culp seems like the right person for the job and GE’s stock is up 8.8 percent since the announcement. I believe Culp can get the stock price to $35 by 2022. |
| Posted: 2018-Oct-30 12:42 by news bot |
Analysts expected $0.20 per share on $29.77 Billion in sales. General Electric also announced a restructuring of the power business and a cut in the quarterly dividend from $0.12 to $0.01. CFO Jamie Miller noted that "The SEC expanded the scope of its ongoing investigation to include the goodwill charge" after the firm recorded a pre-tax impairment charge of $22.8 Billion related to the power business. |
| Posted: 2018-Nov-06 14:11 by news bot |