GE sinks as oil outlook sputters, marring end of Immelt’s tenure

Even in his final days as General Electric’s CEO, Jeffrey Immelt can’t escape the stench of oil.

GE’s profit is likely to barely meet the projected range as sluggish crude prices keep a lid on demand for oil field equipment, the company said Friday as it reported earnings. The shares plunged the most in almost two years.

“The resource markets remain challenging,” Immelt said on a confer- ence call with analysts. The Boston-based provider of gas turbines and artificial lift systems is seeing “pressure in power and oil and gas.”

The outlook marks a disappointing end to Immelt’s tumultuous 16-year tenure as chief executive officer, during which GE trailed the broader stock market. Oil has become a symbol of the company’s hurdles after Immelt spent billions on crude-related acquisitions in the years before prices collapsed. He closed a deal this month to merge those assets with Baker Hughes, with GE retaining a majority stake in the combined entity.

The shares tumbled 2.9 percent to $25.91 Friday after dropping as much as 5.4 percent for the biggest intraday decline since August 2015. The drop extends GE’s slide this year to 18 percent, making the company the biggest loser in 2017 on the Dow Jones industrial average, which has advanced 9 percent.

This year’s earnings are likely to be near the bottom of the company’s forecast of $1.60 to $1.70 a share, Chief Financial Officer Jeff Bornstein said on the call. Analysts anticipate $1.62 a share, based on the average of estimates compiled by Bloomberg.

Industrial operating cash flow will also be toward the low end of the $12 billion to $14 billion outlook, “driven by pressure principally in power and oil and gas,” Bornstein said.

Falling on Flannery

The challenges of navigating those markets will fall to John Flannery, a GE veteran whose most recent job was to run the health care unit, after he takes over from Immelt on Aug. 1. He will also have to contend with pressure from activist investor Trian Fund Management. GE agreed earlier this year to deepen cost cuts after discussions with the firm, which was co-founded by Nelson Peltz.

In preparation for the CEO transition, Flannery has been meeting with investors, customers, employees and govern- ment officials. He plans to provide an update in mid-November to detail his plans for capital allocation and cost cutting. Flannery will focus on “reframing our look at 2018 and beyond,” he said on the call.

Adjusted earnings in the second-quarter fell to 28 cents a share, GE said. That exceeded the 25 cent average of analysts’ estimates compiled by Bloomberg. Sales declined 12 percent to $29.6 billion, compared with $29.2 billion expected by analysts.