[CEO's Distress Power Business Dividends Are Suspected to Be Insured] "The 100-year-old" GE has fallen by the deepest in nine years. In August last year, John Flannery, the chief executive officer of the company's medical business who officially took over as GE CEO, took part in electrical activity in Florida, USA on Wednesday. Product Group (EPG) annual meeting. Although he reiterated the profit guidance target of 2018, he also admitted that the company’s former “CowPower†power business (GEPower) will not be profitable until 2020, triggering a deep drop in the stock price.
General Electric's intraday decline expanded to 7.7%, close to the single-day loss record of 8.4% on April 20th, 2009, which eventually closed down 7.26% at $14.18, the lowest since May 7. The price of corporate bonds that expired in 2032 and the 3.5% coupon rate fell 2 cents to 89.86 cents, the lowest since the issue. In the past two months, General Electric has increased by 20% from the low of $12.83 that was created on April 9. Today's crash is a worry for future stock prices.
In her speech at the conference, Flanner reiterated that the 2018 earnings target is EPS of US$1 to 1.07, and also reiterated that it will achieve free cash flow target; Baker Hughes’s oil and gas division is expected to achieve a profit growth of at least 50 percent this year. %, aviation business profits will increase by another 15%; the cost reduction of the electricity business will also exceed the $1 billion target for the year.
However, he also admitted that due to the weak demand for the company’s flagship models of heavy-duty gas-powered turbines, the power business will not be profitable until 2020, and it is unlikely that growth will be achieved. The company is also trying to repair the insurance business and power service departments. He believes that the market may want to see a faster transition, but there is no quick solution. Bloomberg believes this is the main reason for the pressure on the stock price.
In this important industry meeting, Flannner also declined to comment on further changes in the company's business portfolio and dividend adjustments in 2019, but said that future dividends will depend on the combination of cash and assets. Fox News reported on Tuesday that GE is reportedly considering cutting or canceling future dividends, as well as meeting the forecast of JP Morgan analyst Steve Tusa.
According to the "Daily Economic News", GE announced in November last year that it would cut its quarterly dividend to 12 cents, which is the second time since the financial crisis to reduce the dividend, and it is also the first time during the non-financial crisis to cut the dividend. In the history of 126 years of development, GE only experienced two reductions in dividends, in 1938 and 2009, while the dividend of 8.87 billion in 2009 was also the highest decline in the history of the S&P 500 companies. .
This week, General Electric also agreed to spin off its 100-year-old transportation business and merge with Wabtec, a manufacturer of train braking systems. The deal valued at approximately US$ 11.1 billion and is expected to be completed by 2019. The market has also been speculating that the company will first strip off business assets such as transportation and medical IT. However, Flann said on Wednesday that the health care and aircraft engine sectors remained strong.
Analysts believe that Flanner’s refusal to comment may indicate that in the future, GE’s business portfolio will be further adjusted and dividends will be further reduced, because he has always emphasized the importance of free cash flow at the meeting. In Flannard's vision, GE should have a higher level of cash holdings, reduce reliance on short-term financing, and contribute to employee pension funds. The official website shows that before the spin-off of the transportation sector, the company has eight business units: power generation, oil and gas, aviation, medical care, transportation, renewable energy, and finance.
An interesting phenomenon is that the EPG meeting has become General Electric's "stock curse" for the past two years. Last year's meeting was with former CEO Jeff Immelt, who at the time believed that 2018 would achieve an EPS of $2 per share and was criticized by many as “unrealisticâ€. After the meeting, he experienced a deep drop in stock prices, Immelt. It will also announce retirement within three weeks after the end of the meeting. Compared with the same period of last year, General Electric's stock price fell by 50%, which is the worst performer among the 30 constituent stocks of the Dow.
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