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GE’s Tough 2018 Projection and Subsequent Stock Fall

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GE’s investor update

US diversified industrial (IYJ) giant General Electric (GE) held its latest investor update on November 13, 2017, and made its investor community aware of GE’s future plan of action.

After GE’s investor update on November 13, 2017, the company’s stock plummeted to a new five-year low.

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GE’s stock price reaction

The company’s stock price closed at $18.3 per share on November 15, 2017, which represents an 11% fall over its closing price of $20.5 on November 10.

Since the beginning of 2017, General Electric has lost more than $110.0 billion in market capitalization. The Financial Times reported that GE has lost its crown to Boeing (BA) as the largest US manufacturer (LMT) by market capitalization.

GE’s market capitalization was $155.2 billion on the closing price of November 14, 2017—well below Boeing’s $155.9 billion. Market sentiments are questionable toward GE, however, as a section of investors feel that GE’s new plan may not be sufficient to wake the company up from hibernation.

GE’s new focus

GE chairman and chief executive John Flannery stated that the company intends to focus on the following four main areas:

  • building and improving strong franchises
  • steering the GE Power segment into stable seas
  • capital allocation by a way of a 50% dividend cut and limited merger and acquisition opportunities in the short term
  • simplifying the existing complex business portfolio

The company has already announced in its 3Q17 earnings call that it plans to divest businesses worth $20.0 billion in asset value. Flannery also indicated his intentions with an exit option for Baker Hughes (BHGE).

In this series, we’ll go through GE’s plans on portfolio simplification and capital reallocation. We’ll also check in with the analysts’ views on the company after its new plan announcement.

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