General Electric dividend cut, earnings miss, power business reorg

Marco Green
October 31, 2018

The federal investigations pile pressure on GE, which already was contending with one of the deepest slumps in its 126-year history amid cash-flow shortfalls and declining demand for its gas turbines.

Miller on Tuesday morning disclosed that the U.S. Securities and Exchange Commission has expanded its investigation into that charge, and the U.S. Department of Justice has begun an investigation of its own.

"However, our results are far from our full potential". "We are on the right path to create a more focused portfolio and strengthen our balance sheet".

GE had been paying a dividend of 12 cents since December 2017, when it was cut from 24 cents, according to FactSet. But without a meaningful dividend to reward them for their troubles - and given the extent of GE's challenges - some analysts are telling investors to exercise caution. Its 4.418 per cent bonds due 2035, the most actively traded in the investment-grade market, fell nearly a cent to a record low of 89.312 cents on the dollar, according to Trace bond-price data. Flannery had suggested a reduction was likely, following a separation of the health-care unit in another year.

Culp, who joined GE's board in April, has been visiting the company's businesses since taking over. He drew parallels between the Boston-based company and the Boston Red Sox, pointing out that the team was able to win the World Series with mostly the same players as its disappointing season past year.

Culp signalled more change ahead for the troubled power division, announcing plans to split power into two units, one focusing on gas and industrial services and the other comprising steam, grid solutions, nuclear and power conversion. It could take years for GE to turn around that business. "This is not something that's going to be fixed in a quarter or two, and even really a year or two could be optimistic".

The loss compares with profits of $1.3 billion in the year-ago period and is due to a $22 billion write-down announced when GE tapped H. Lawrence Culp as chief executive earlier this month.

The conglomerate slashed its dividend to a penny - from $0.12 a share. "We find the move courageous and necessary and a sign that Mr. Culp will not take half measures to improve the company", Jim Corridore of CFRA Research said in a note to clients. Adjusted earnings fell to 14 cents a share, well shy of the 20-cent average of analyst estimates compiled by Bloomberg.

"Power is bad and certainly nowhere near as salvageable as bulls think, and we also don't believe aviation can sustain these types of results", J.P. Morgan's Stephen Tusa said in a note.

Other reports by Click Lancashire

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