GE shares jump after CEO Flannery ousted amid Power unit challenges
Shares of GE (GE) are rising in pre-market trading after the shrinking conglomerate announced that H. Lawrence Culp, Jr. has been named Chairman and CEO, replacing John Flannery, effective immediately.
The company stated that while its businesses other than Power are “generally performing consistently with previous guidance,” the company will fall short of previously indicated guidance for free cash flow and EPS for 2018 due to weaker performance in the GE Power business.
GE expects to take a non-cash goodwill impairment charge related to the GE Power business that will likely be as much as the approximately $23B current goodwill balance for the business, GE added.
GE previously forecast FY18 EPS at the low end of its $1.00-$1.07 range. The current EPS consensus is 95c.
RECENT ANALYST CONCERNS
In a recent note to investors, RBC Capital analyst Deane Dray lowered his price target on GE shares to $13 from $15, stating that the company had yet to reach a point where bad news does not make the stock decline and arguing that the bottom had not yet been reached.
Last month, JPMorgan analyst Stephen Tusa lowered his price target for General Electric to $10 from $11 and kept an Underweight rating on the shares.
The analyst’s channel checks, which were confirmed by GE Power’s CEO, GE investor relations, suggested GE had experienced a failure in a first stage blade on an H-frame in one of its two initial marquee installations in the U.S., Colorado Bend. Further, Tusa said the problem was material enough for Exelon (EXC) to have shut the plant down, along with the “award winning” Wolf Hollow plant for precautionary measures.
There should no longer be any doubt that GE Power has company-specific issues, Tusa contended at the time, stating that his new price target assumed weaker results at GE Power and some franchise value impact.
In Monday’s pre-market trading, GE shares are up $1.53, or 13.5%, to $12.82.
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