Daily Management Review

GE shares plummet after the company head’s forecast


03/06/2019


GE CEO Lawrence Culp said that the company's cash flow would be negative this year.



rik-shaw via flickr
rik-shaw via flickr
This statement was made during the Aviation, Transportation & Industrials Conference in New York, organized by investment bank JP Morgan. In 2018, General Electric's free cash flow amounted to $ 4.5 billion.

Against the background of these forecasts, General Electric shares at the opening of trading on the New York Stock Exchange fell by 7%. During the trading, the decline slowed to 4.7%. The once-leading US industrial corporation continues to experience serious problems, culminating in 2018 with exclusion of the General Electric from the Dow Jones Industrial Average.

In the autumn of 2018, the rating agencies S&P Global Ratings and Fitch downgraded GE's credit rating by two points, from “A” to “BBB +”.

Against the background of financial problems, General Electric has changed management twice over the past few years: John Flannery was appointed new Head after Jeffrey Immelt’s early resignation in October 2017. The latter headed GE for 16 years and left the company several months before the previously announced period. Flannery served as Chief Executive Officer for about 1 year, and on October 1, 2018, Lawrence Culp was appointed to this position.

New Head of General Electric, who forecasted negative cash flow of the company in 2019, became the first head of GE for the 126-year history of the company, who took this position after moving from another company.

It is worth adding that General Electric is not the first American company that actually expects a reduction in profits this year. Earlier, Coca-Cola made a forecast of potential profits decline.

A number of experts have already stated that many US companies are actually expecting a recession in corporate profits in 2019. This can be regarded as a rather serious signal in terms of forecast estimates for a decrease in consumer activity and a slowdown in the growth of the American economy this year.

source: bloomberg.com






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