General Electric slashed its profit forecast as earnings fell far short of expectations, underscoring the severity of the challenges facing the company's new boss.
Chief executive John Flannery is grappling with one of the deepest slumps in the beleaguered manufacturer's history, with hurdles from poor cash flows to slumping power-generation markets.
The shares plunged in premarket trading, setting up GE to extend what already is easily this year’s biggest loss on the Dow Jones Industrial Average.
The latest results are “completely unacceptable”, Mr Flannery said on a conference call with investors. “We need to make some major changes with urgency and a depth of purpose.”
The cut is the latest step in what is shaping up to be a dramatic repositioning of GE under its new leadership. Mr Flannery this month welcomed a representative of activist investor Trian Fund Management to GE's board and announced several management changes. He is seeking deep cost cuts and has said he would consider all options, including portfolio changes.
“Everything is on the table,” Mr Flannery said on the earnings call, his first as chief executive. “Things will not stay the same at GE.”
The shares tumbled 8.3 per cent to $21.62 before the start of regular trading in New York.
The new chief executive, who will detail his plans to reshape the company at an investor meeting on November 13th, is targeting more than $20 billion of asset divestitures within two years, GE said.
Adjusted earnings this year are expected to be $1.05 to $1.10 a share, down from a previous range of $1.60 to $1.70 a share, GE said Friday in the statement. Analysts had anticipated $1.54 a share.
The maker of jet engines and gas turbines reported that adjusted profit decreased to 29 US cents a share for the third quarter, falling well short of the 50-cent average of analysts’ estimates. GE hasn’t missed estimates by more than half a cent in over nine years.
Earnings were hurt by restructuring and impairment charges, as well as a sharp decline in profit in the power-generation division. – (Bloomberg)
