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Disappointing 3Q17 Results Force General Electric to Cut Guidance

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Disappointing 3Q17 Results Force General Electric to Cut Guidance PART 1 OF 10

General Electric Slid 6.3% on Poor 3Q17 Earnings, Guidance Slashed

GE’s 3Q17 earnings

General Electric (GE) announced its 3Q17 earnings on October 20, 2017. The company’s reported earnings per share (or EPS) of $0.21 were well behind the Thomson Reuters analysts’ estimate of $0.45. This reflects a significant earnings miss of 53.6%. The adjusted EPS of $0.45 missed analysts’ earnings projections by 8.8%.

On a YoY (year-over-year) basis, General Electric’s 3Q17 adjusted EPS of $0.45 was up 40.6% from $0.32 per share in 3Q16. Substantial restructuring costs pressured the company’s earnings along with a 51% slump in the Power segment’s operating income.

General Electric Slid 6.3% on Poor 3Q17 Earnings, Guidance Slashed

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In 3Q17, GE reported industrial plus vertical operating EPS f $0.29, down 9% compared with its 3Q16 levels. General Electric’s earnings per share from continuing operations totaled $0.22, down 4% on a year-over-year basis from $0.23 in 3Q16.

Stock price reaction

GE’s 3Q17 earnings mark the beginning of the quarterly results under John Flannery’s leadership as GE’s CEO. However, the markets anticipated these subdued earnings. 

After the 3Q17 earnings announcement, GE stock fell 6.3%, closing at $22.30 on October 23, 2017. Now, all eyes are set on November 13, 2017, when GE is expected to furnish more information about the plan and its expectations.

Since January 1, 2017, GE stock has lost more than 23% of its value based on its closing price on October 19. The uncertainty over the business strategy has loomed over General Electric. We’ll take a look at its peers’ year-to-date stock price changes in 2017:

  • Illinois Tool Works (ITW): rose 27%
  • 3M (MMM): rose 24%
  • United Technologies (UTX): rose 10.3%
  • Honeywell International (HON): 25.5%

During the same period, the SPDR S&P 500 ETF (SPY), an indicator of the broad market, rose 15%.

GE cut 2017 guidance

General Electric expects to deliver adjusted EPS of $1.05–$1.10 after its 3Q17 earnings. The company previously guided for estimated adjusted EPS of $1.60–$1.70 for fiscal 2017.

In this series, we’ll look at GE’s segmental performance for 3Q17. We’ll also turn to analysts for their recommendations on the company and its peers.

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