GE shares fall as second- quarter profi t slumps

The shares of General Electric Co ( GE) dropped sharply on Friday after it posted a 59- percent decline in second- quarter profi t and put off an expected cut to 2018 earnings targets until November, when new CEO John Flannery will be four months into his job.

The maker of power plants, jet engines, medical scanners and other industrial equipment said profi t and sales declines largely refl ected sale of its appliances business.

It beat analyst expectations on adjusted profi t, but cash fl ow was weak and GE said full- year profi t and cash fl ow will be at the low end of its forecasts.

GE also said it would update its 2018 earnings target of $ 2 a share in November, later than analysts had expected. Analyst consensus 2018 estimate is $ 1.73, already suggesting a signifi cant cut.

The length and scope of the review raised concern, since GE has just come through major shifts in its portfolio.

“It’s discouraging that we’re going to wait again for the company to perform as we wait for the new CEO to review everything,” said Jim Corridore, analyst at research fi rm CFRA, which cut GE shares to “hold” after Friday’s results.

Incoming CEO Flannery acknowledged on a conference call that his review would take time, but said it had not altered GE’s 2017 outlook.

Still, the stock could be in “in a state of limbo” until the review is fi nished, Deane Dray, analyst at RBC Capital Markets, said in a note.

GE’s cash fl ow was below expectations and also weighed on the stock, said Jeff Windau, analyst at Edward Jones. “People want to get the answers sooner” to Flannery’s review.

Shares were down 3 percent at $ 25.87 in mid- morning trading on Friday after earlier hitting a 2- year low.

GE faced a “slow- growth, volatile environment” in the quarter, Chief Executive Jeff Immelt said in his fi nal earnings release before his retirement on August 1.

Immelt’s tenure began days before the terrorist attacks on September 11, 2001 and included the 2008 fi nancial crisis. While GE stock is 27 percent below its price when Immelt arrived, it has more than tripled from its nadir in 2009.

Immelt sold off NBCUniversal, appliances and most of GE Capital. He acquired power assets from France’s Alstom, merged GE’s oil and gas business with Baker Hughes, and moved the headquarters to Boston.

Flannery said he is “in the middle of a series of deep dives into the businesses.” He also is “taking a hard look at our corporate spending” to ensure it contributes to earnings, and on a listening tour of investors.

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.