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Why General Electric Might Not Meet Analyst Estimates in 3Q17

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Part 4
Why General Electric Might Not Meet Analyst Estimates in 3Q17 PART 4 OF 6

Will Management Changes Mean a New Era for General Electric?

Changes in the top brass

Normally, a new CEO is expected to make certain changes to the top brass to create a new upper management team. John Flannery swung into action and made some leadership changes at General Electric (GE). On October 6, the company announced the appointment of a new CFO. Jamie Miller is slated to replace longtime CFO Jeff Bornstein effective November 1, 2017. Miller currently heads GE’s Transportation vertical. Notably, she joined the company in 2008.

Will Management Changes Mean a New Era for General Electric?

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General Electric surprised the market with a retirement announcement for Beth Comstock and John Rice. Both are slated to retire from GE at the end of 2017. Rice’s departure from the company was much more surprising. Note that Rice headed GE’s energy business for a considerable time.

During his tenure, the vertical witnessed solid growth, taking revenues to $8.0 billion after rebranding as GE Wind Energy. Rice was also part of GE’s Global Growth Organization. There, he was responsible for the company’s expansion to around 200 countries worldwide from 100 initially.

The biggest surprise came in the form of the appointment of Ed Garden of Trian Partners to the board of directors. Ed Garden is a chief investment officer and founding partner of Trian Fund Management. On October 9, GE declared that he’d replace Robert Lane, who will retire after 12 years of service.

What does this mean?

The recent reshuffling in the top brass indicates the need for fresh blood at General Electric. The reasons include the dwindling stock price, drying operating cash flows, and poor receivables management. What we can infer from this exercise is the strategic building-up of the new GE management to rebrand the company.

With a new set of people, General Electric is stepping into a new era of possibilities with new people, new expertise, and new industries. Having said that, not all the issues GE is facing today can be solved with changes in the top brass. The company is a must-watch for next one or two quarters.

ETF discussion

Investors with an appetite for indirect investment in large-cap stocks can consider the SPDR S&P 500 ETF (SPY). GE makes up 0.92% of SPY. 

The market is abuzz with speculation that GE will most likely cut dividends. Learn more in the next part of this series.

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