GE slashes div­i­dend ahead of ex­pected re­struc­tur­ing

The Gulf Today - Business - - VIEWPOINT -

NEW YORK: Gen­eral Elec­tric Co chopped its quar­terly div­i­dend in half on Mon­day, new Chief Ex­ec­u­tive John Flan­nery’s first move in an overhaul of the con­glom­er­ate he is due to an­nounce later in the day.

GE cut the div­i­dend to 12 cents per share from 24 cents start­ing in De­cem­ber, which is ex­pected to save the com­pany about $4 bil­lion in cash an­nu­ally.

Its shares were up 0.7 per cent at $20.64 in pre­mar­ket trad­ing. The stock is the worst per­form­ing Dow com­po­nent this year, down 35 per cent through Fri­day’s close.

Flan­nery plans to fo­cus on three of GE’S big­gest busi­ness lines avi­a­tion, power and health­care the Wall Street Jour­nal re­ported ear­lier on Mon­day, cit­ing a per­son fa­mil­iar with the mat­ter. In­vestors gath­er­ing in New York to hear Flan­nery’s pre­sen­ta­tion told Reuters that GE’S plan as out­lined so far was largely as ex­pected, but left open the ques­tion of how the com­pany will gen­er­ate the cash flow that it has failed to de­liver in re­cent years.

GE will pro­vide de­tails about its busi­ness and strat­egy at an in­vestor pre­sen­ta­tion at 9 a.m. (1400 GMT).

Flan­nery’s strat­egy is a turn­ing point for the com­pany, which over sev­eral decades built it­self into a sprawl­ing con­glom­er­ate with in­ter­ests across me­dia, en­ergy, bank­ing, avi­a­tion, rail­roads, marine en­gines and chem­i­cals.

The move to make GE smaller and nim­bler would be a turn­around from the pre­vi­ous multi-busi­ness ap­proach taken by for­mer CEOS Jack Welch and Jeff Im­melt.

Flan­nery’s changes would repu­di­ate much of Im­melt’s vi­sion of a “dig­i­tal in­dus­trial” com­pany that builds soft­ware to man­age and op­ti­mize GE’S jet en­gines, power plants, lo­co­mo­tives and other prod­ucts.

Con­glom­er­ates are out of fa­vor on Wall Street, where in­vestors pre­fer to bet on spe­cific in­dus­tries rather than a mixed port­fo­lio.

GE ex­ec­u­tives have said that an­a­lysts have un­der­val­ued the com­pany’s dig­i­tal busi­ness. They ar­gue the dig­i­tal units should be val­ued more like Ama­ Inc, Al­pha­bet Inc’s Google and other fast-grow­ing tech com­pa­nies.

An­a­lysts have dis­agreed about GE’S value.

Scott Davis at Melius Re­search said GE’S parts are worth about $31 per share, based on pro­jected 2020 earn­ings. But Stephen Tusa at Jpmor­gan pegged the value of the parts at about $17 per share, based on 2018 fi­nan­cial es­ti­mates and lower val­u­a­tions for units in­clud­ing power, re­new­able en­ergy and trans­porta­tion.

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