GE profit slumps; shares in 'limbo' as investors await new CEO's targets

Ashley Carr
July 22, 2017

The results give the departing CEO a boost as he prepares to hand the reins to John Flannery.

GE's earnings report will be the last for outgoing CEO Jeff Immelt, who had been criticised by numerous company's shareholders.

Shares of the USA conglomerate fell more than 4% in morning trade after it said profits fell 57% to $1.2bn, as sales in its oil and gas, transportation and lighting divisions fell.

Winners and Losers: Shares of General Electric sunk almost 3 percent after posting a decline in second-quarter profit.

The outlook marks a disappointing end to Immelt's tumultuous 16-year tenure as chief executive officer, during which GE trailed the broader stock market.

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Morgan Stanley analyst Nigel Coe said "with no firm news on the strategy and earnings reset" until after the third quarter of this year, he doesn't expect many positive catalysts for the shares, in a recent note to clients. He acquired power assets from France's Alstom, merged GE's oil and gas business with Baker Hughes, and moved the headquarters to Boston. "People's openness to rethinking things or thinking about things differently or challenging many things we've taken for granted is encouraged, and people get excited about that".

Flannery said he is "in the middle of a series of deep dives into the businesses".

GE has cut $670-million in industrial overhead costs this year, Immelt said, and will "meet or exceed" its $1-billion target for 2017 - a goal set after discussion with activist investor Trian Fund Management.

Net profit slumped 59 per cent to $1.34-billion, or 15 cents a share, in the quarter ended June 30, from $3.30-billion, or 36 cents a share, a year earlier.

In the second quarter, Earnings per Share came in at 28 cents, as opposed to expectations of 25 cents. Industrial cash flow was $1.5 billion, much better than in the prior quarter. It raised the low end of its full-year EPS target, moving from $6.90-$7.10 to $7-$7.10, lifting the midpoint by 5 cents.

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