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yes sir – last time the stock dropped this much was July 17, 2009, when it fell 6.1% after Q2 2009 results. $GE on track to open at the lowest price seen during regular session hours since Aug. 24, 2015 puts it in danger of its lowest close since April 25, 2013.
Restructuring and impairment charges cost GE $0.16 per share in earnings during the quarter, AND those charges are likely to continue in Q4 at least
If u were the new CEO of a company that needed a turnaround
would you not also toss out the worst earnings report possible so that every report following looks good?that is what happened here with GE, a ‘kitchen sink’ quarter
[quote=”Assistanc3″ post=2537]If u were the new CEO of a company that needed a turnaround
would you not also toss out the worst earnings report possible so that every report following looks good?that is what happened here with GE, a ‘kitchen sink’ quarter[/quote]
Agree clear the decks
After being down 8% General Electric showed itself to be an industrial heavyweight and closed up 25 cents $GE 23.83, +0.25 with a gain of 1.1%. This brought the dow up and the industrial sector (+1.1%) finished right behind financials at top of the leaderboard.
General Electric Co.’s next finance chief promised Friday to get “back to basics” with the conglomerate’s financial reporting, after the latest quarterly results highlighted the complexity of the company’s bookkeeping.
Sharp revisions to the company’s forecasts for the current year, just three months after the company had backed them, raised fresh concerns among investors and analysts about the way the company measures its performance.
The financial reports will likely be a focus of new CEO John Flannery and incoming Chief Financial Officer Jamie Miller. In meeting with investors in recent months, the new boss was told that the MUDDY REPORTING needed to change.
In his letter to employees on his first day, Mr. Flannery said he heard investors “loud and clear.”
GE presents its financials to investors in unusual ways. Besides reporting traditional earnings per share under generally accepted accounting principles, GE also reports that figure on an adjusted basis that excludes results of businesses that might be sold in the future.
The Boston-based company also reports a key cash-flow metric differently from most public companies. The company adjusts the figure to exclude taxes on the company’s deals, as well as costs to fund its employee pension plan.
Wall Street analysts have long expressed frustration with GE’s presentation of financial results, typically describing the accounting as “aggressive.” In a recent note to clients, William Blair analyst Nicholas Heymann expressed hope that Mr. Flannery’s review would include “replacing aspirational with tangible pragmatic operating targets and simplifying GE’s accounting.”
Ms. Miller promised changes on a conference call with Wall Street analysts on Friday, including scrapping its adjusted earnings figure and reporting cash flow in line with industry standards.
“We’re really looking at, how can we report in a much cleaner way, just a much simpler presentation of what you see? I’d kind of call it a back-to-the-basics approach,” she said.
Mr. Bornstein told investors Friday he was leaving because of the company’s poor performance. “We are not living up to our own standards or those of investors, and the buck stops with me,” he said.
On Friday, GE cut its profit targets for the year by a third and sliced its forecast for cash flow by half. The company’s ability to generate cash has been a question among investors, nervous about its ability to support its $8 billion annual dividend. Those fears have been heightened since the first quarter of the year, when GE surprised investors with a negative cash flow.
One focus of investors has been the ability of the company to use its GE Capital business to smooth earnings of the more-cyclical industrial business. As GE has sold down its financial operations, its overall financial performance has declined.
GE executives told investors the company’s GE Capital business didn’t pay a dividend to the parent company—and would halt any such payments until the company completes an actuarial analysis of claims reserves in the company’s long-term-care reinsurance business.
Mr. Bornstein also disclosed the company had made a $500 million correction to the cash flow reported in the first half of the year. He said it had been underreported because derivative hedge settlements had been incorrectly classified.
The company has made other changes to its reporting in recent history. In May GE changed the way it calculates the rate that profits convert into free cash flow, a closely watched metric for industrial companies.
The effects of the change resulted in more-impressive figures. GE reported a conversion rate of 91% for 2016 under the new method, instead of 76% under the old method.
WSJ journalist Charley Grant
[quote=”Corporal” post=2559]
One focus of investors has been the ability of the company to use its GE Capital business to smooth earnings of the more-cyclical industrial business. As GE has sold down its financial operations, its overall financial performance has declined[/quote]Timely post after yesterday’s action – that stood out to me – does that mean they can’t play with numbers as much anymore
Don’t fool urself, GE has more than enough accountants on hand to make whatever earnings report they want. It is well known that $GE under Jack Welch, is the most fudged earnings reporting company of all time.
As I mentioned earlier, this was the kitchen sink earnings report
everything from here on will look like roses ……….its what they do.[quote=”Blarney” post=2560][quote=”Corporal” post=2559]
One focus of investors has been the ability of the company to use its GE Capital business to smooth earnings of the more-cyclical industrial business. As GE has sold down its financial operations, its overall financial performance has declined[/quote]Timely post after yesterday’s action – that stood out to me – does that mean they can’t play with numbers as much anymore[/quote]
General Electric (NYSE:GE) -0.5% premarket after Morgan Stanley downgraded the stock to Underweight from Equal Weight, citing higher probability of a dividend reduction. PT reduced to $22 from $25.
UBS also lowered the stock to Neutral from Buy, following Friday’s “disappointing” Q3 results and “a lot of negative sentiment now reflected in the shares.” PT cut to $24 from $31.
RBC Capital analyst Deane Dray reiterated outperform rating on $GE
He believes the stock’s intraday recovery Friday, in the face of a “draconian” guidance cut and “brutal honesty” by new CEO John Flannery about GE’s troubles could be “the first sign of a cathartic bottoming” for the stock. Dray reiterated the outperform rating he’s had on the stock for at least the past three years.
[quote=”Assistanc3″ post=2578]General Electric (NYSE:GE) -0.5% premarket after Morgan Stanley downgraded the stock to Underweight from Equal Weight, citing higher probability of a dividend reduction. PT reduced to $22 from $25.
UBS also lowered the stock to Neutral from Buy, following Friday’s “disappointing” Q3 results and “a lot of negative sentiment now reflected in the shares.” PT cut to $24 from $31.[/quote]
Analyst Nigel Coe at Morgan Stanley said it is “false” logic to believe, after Flannery threw out the kitchen sink in his assessment of the company, that things can’t still get worse.
He downgraded GE to underweight, after being no worse than equal weight for at least the past three years, and cut his stock price target to $22 from $25.
Coe is now the third of the 20 analysts surveyed by FactSet to rate GE the equivalent of sell.
On the New CEO
“However, the scale of the challenges that he and his new team face are greater than even we had imagined,” Coe wrote in a note to clients.
He now expects GE to announce a dividend cut at the Nov. 13 investor gathering, to reflect “substantially lower earnings power” and given the sharp increase in debt on its balance sheet over the past few years.
“We understand that retail investors who make up [about] 44% of the GE investor base, are income focused and that a dividend adjustment is the last resort for any board of directors,”. “But for reasons of flexibility,and increasing liquidity, we believe GE should cut its dividend from [96 cents] to closer to [70 cents],” Coe wrote that is a level he believes GE can support.
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