By Alwyn Scott
General Electric (GE) has reported a smaller-than-expected drop in profit but cut a key financial target, raising questions about its outlook for the year and sending shares sharply lower.
The 126-year-old industrial conglomerate, whose power and financial-services units are struggling, said it expects to generate perhaps $1bn (€860m) less free cash- flow than expected this year.
In Ireland, GE employs around 2,200 people in healthcare, aviation, oil and gas, and banking, in Cork, Shannon, and Dublin.
GE said weakness in power and renewables energy have offset gains in its aviation and healthcare units.
Last month, GE was removed from the Dow Jones Industrial Average, ending more than a century on the blue-chip index. A decade and a half ago, GE was the world’s most valuable public company.
However, the Boston-based company foundered in several industrial markets in recent years, and its move into financial services steered it into the global financial storm in 2008.
GE’s earnings were above expectations in part because it cut corporate overhead costs more than analysts expected and the losses at GE Capital were less than analysts expected, said Deane Dray, analyst at RBC Capital Markets.
The results capped an unusually busy quarter in which chief executive John Flannery announced a long-awaited breakup plan to spin off its healthcare unit and sell its 62.5% stake in oil services firm Baker Hughes over the next three years.
The forecast cast doubt on GE’s full-year adjusted profit target of $1 to $1.07 a share.
Though GE affirmed that target, many analysts see it as unrealistic and had cut estimates after GE’s weak first-quarter results.
“We are getting questions as to how the company can maintain EPS guidance while cutting free cash flow guidance,” JPMorgan analyst Stephen Tusa wrote in a note. GE cut the industrial free cashflow target to $6bn from a range of $6bn to $7bn.
GE revealed no new bad news about ongoing accounting investigations, a shareholder lawsuit and a federal inquiry into subprime mortgage activity, and appeared to be operating better, some analysts said.
The shares fell by 4.7% at one stage, valuing GE around $115.7bn.
Reuters. Additional reporting Irish Examiner