GE OUTPERFORMS STREET ANALYSIS
Hub conglomerate sees results from cost cutting
Shares of General Electric surged yesterday after the Boston industrial conglomerate reported better than expected earnings, ending a run of poor results as the company tries to find a way forward.
“I’m excited about the path we are on,” chief executive John Flannery said on a conference call with analysts. “We are taking a new approach on how we run the company.”
Yesterday, GE said it saw adjusted earnings of $0.16 per share, above analysts’ expectations. That sent the company’s stock immediately higher, rising more than 7 percent early yesterday before closing just under 4 percent on a day the Dow Jones Industrial Average fell nearly 1 percent.
Last year, Flannery unveiled an ambitious plan to turn around GE after years of disappointing results, including cutting billions in costs.
“Last year, given the urgency and severity of our challenges, we launched directly and with brute force into cost-cutting mode and improving our cash controls during the second half of the year,” he said.
The plan includes selling off parts of GE, including parts of its health care, lighting and transportation businesses. Power has been one of the worst-performing parts of the company. A new corporate structure will give individual businesses more autonomy, Flannery said.
“Our business units will be the center of gravity,” he said. “HQ will be substantially smaller and will focus only on strategy, governance, capital allocation and talent.”
GE’s new headquarters in Boston is still expected to have about 800 employees when it is finished in 2021.
Jeff Windau, an analyst with Edward Jones, said GE’s results were certainly no blowout, but were still a good start for the company’s much-ballyhooed turnaround.
“I definitely think it’s a good start,” Windau said. “They’re working their plans and we’re starting to see some progress, which is a good sign.”
GE has been the worst-performing company in the Dow, and has been hit by bad news after bad news. Yesterday, GE said it was putting aside $1.5 billion related to a federal investigation into its now-shuttered subprime mortgage unit. Still, that paled in comparison to other unexpected charges GE disclosed recently, including $15 billion for payments related to an old insurance division.
Soon after, GE said the Securities and Exchange Commission was looking into the discrepancy. “We know they’re still working the process. It’s going to take some time to work through everything,” Windau said.