GE Shares Fall Again, Hit New Low -- Update
November 12 2018 - 5:25PM
Dow Jones News
By Thomas Gryta and Saumya Vaishampayan
General Electric Co.'s shares continued their long slide Monday
even as new Chief Executive Larry Culp tried to put the market at
ease about the direction of the conglomerate and its troubled power
division.
The stock fell as much as 10% Monday before recovering some of
its loss to end at $7.99, down 6.9%. It was its first drop below $8
on an intraday and closing basis since March 2009.
The latest decline came after Mr. Culp said the company's power
business is "getting close" to a bottom in an interview Monday with
CNBC, indicating that woes for the unit could continue. That
business has been plagued by issues like dropping global demand and
turbine blade failures, which have contributed to the stock's swoon
in recent months.
The power business has cut $700 million in costs this year and
reduced its facility footprint by 20%, which Mr. Culp said are
"good things to do in a manufacturing business, but it is not
enough." He said there is still $7 billion in annual costs in the
power business.
Mr. Culp jumped into the CEO role about six weeks ago and
virtually eliminated the once-sacred dividend but also disclosed a
criminal probe into GE's accounting and declined to provide any
financial guidance.
The CEO's comments add to concerns that there might be more bad
news from GE. "We do not think the businesses are fundamentally
broken. However, modeling an appropriate near-term trough has
proven difficult," Credit Suisse analyst John Walsh said in a note
Monday. He added "poor visibility into fundamentals coupled with
uncertainty around liabilities keep us sidelined."
Mr. Culp tried to address those questions in the interview,
noting that retail investors are exiting the stock after the
dividend cut and stressing that there are no liquidity issues. The
company has access to about $40 billion in credit lines in place
and is deleveraging the balance through assets sales.
He didn't signal any new moves but hinted at an intention to
quicken the pace of those sales, highlighting options around the
majority holding in Baker Hughes and plans to spin out the
Healthcare division. He warned, though, that he "would rather talk
about what we have accomplished after the fact than negotiate in
public."
Mr. Culp backed the plans of previous CEO John Flannery to lower
debt and streamline GE's hulking corporate structure that oversees
its many businesses. The organization, once seen as an advantage,
has become a cost center.
The stock, which declined for a fourth straight session on
Monday, has slumped nearly 30% since the company unveiled plans two
weeks ago to cut its dividend to a penny, and is down by more than
50% so far this year. It is the latest sign of distress for GE,
which was the most valuable American company in the early 2000s and
an original member of the Dow Jones Industrial Average. GE was
removed from the 30-stock Dow industrials in June.
Kate Moore, chief equity strategist at BlackRock, doesn't see
GE's stock drop as indicative of broader problems with industrial
conglomerates or the economy.
"Investors are certainly watching price movement in a lot of
these bellwether stocks, but I would suggest that there's unlikely
to be a huge sentiment contagion because this is a specific
security issue," she said.
Write to Thomas Gryta at thomas.gryta@wsj.com and Saumya
Vaishampayan at saumya.vaishampayan@wsj.com
(END) Dow Jones Newswires
November 12, 2018 17:10 ET (22:10 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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