While it may not have slashed its dividend, yet, General Electric shares plunged 5% in the pre-market after the company cut its 2017 profit forecast while its new CEO grapples with one of the deepest slumps in the iconic US manufacturer’s history. The company reported that adjusted earnings this year are expected to be only $1.05 to $1.10 per share, down over 30% from a previous range of $1.60 to $1.70 a share. This is also sharply lower than the sellside consensus of $1.54 a share.
For the current quarter, the industrial conglomerate and maker of jet engines and gas turbines reported adjusted Q3 EPS of 29 cents, nearly 50% below the 50 cent consensus estimate.
As Bloomberg reports, the revision underscores the severity of the challenges facing Chief Executive Officer John Flannery, who took over Jeffrey Immelt’s longtime post in August. With hurdles from poor cash flows to slumping power-generation markets, GE is by far the biggest loser on the Dow Jones Industrial Average this year and has seen a quarter of its market value evaporate.
The cut is the latest step in what is shaping up to be a dramatic repositioning of GE under its new leadership. Flannery this month welcomed a representative of activist investor Trian Fund Management to GE’s board and announced several management changes. He is seeking deep cost cuts and has said he will consider all options, including portfolio changes.
In addition to GE no longer using a “shadow” private jet for its CEO, not to mention slashing its fleets of private cars and other corporate perks as the WSJ infamously reported yesterday, expect thousands more in layoffs from what was once America’s most iconic company, which in turn will follow to more complaints by the Fed about America’s growing “qualified labor shortage.” And now we wait news on the fate of the company’s dividend which wall street expects to be “massively” cut.