Finance
GE stock surges after replacing Flannery as CEO
General Electric surged as much as 15% in early trading Monday after the company announced CEO John Flannery would be replaced by current board member and former CEO of Danaher, Lawrence Culp, Jr., after 14 months on the job.
GE also announced a $23 billion goodwill charge on its power business, which has been struggling with a downturn in the gas-turbine market, and said it will likely miss free cash flow and earnings estimates for the fiscal year of 2018.
“GE remains a fundamentally strong company with great businesses and tremendous talent,”’ Culp, who gained recognition for his successful turnaround of Danaher, said in a press release. “We will be working very hard in the coming weeks to drive superior execution, and we will move with urgency.”
Under Flannery’s lead, GE’s market cap declined by more than 50% — from $$220.26 billion to $98.12 billion — since he took over from Jeff Immelt in August 2017.
Monday’s rally could mean investor optimism in Culp’s leadership to turnaround the power business. In its second-quarter earnings report, the company said profits in the unit had fallen 58% and the company expected the business to “remain weak through 2020.”
And the power business could sink even lower thanks to a slowdown in the entire market for gas turbines.
“GE Power has not yet found a bottom in our view due to a continued deceleration in the gas power equipment and services market,” Steven Winoker, an analyst at UBS, said in a September note following the latest earnings report. “The global power market continues to be challenged by overcapacity and low demand, which are keeping gas power capacity additions at bay.”
Analysts polled by Bloomberg have a $15 price target for GE — 15% above where shares were set to open Monday. The stock is down 28% since the beginning of the year.
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