GE Slashes Dividend to 1 Penny, Reveals Deeper SEC Probe

By Thomson Reuters – Re-Blogged From Newsmax

General Electric Co. slashed its quarterly dividend to a penny a share, promised to restructure its power unit and said it faced a deeper accounting probe as new Chief Executive Larry Culp took his first steps to revive the struggling conglomerate.

GE said the U.S. Securities and Exchange Commission and Department of Justice had expanded ongoing investigations to include a $22-billion writedown of goodwill from GE’s power division, which GE reported on Tuesday.

GE’s restructuring of Power comes as the 126-year-old company, once the most valuable U.S. corporation, is reeling from missteps that have eroded profits and forced it to announce more than $40 billion in writedowns in less than a year, among the largest such actions in U.S. corporate history.

Culp, who took over on Oct. 1, delivered more bad news on Tuesday: GE will significantly miss its full-year cash flow target of about $6 billion, and cannot estimate profits for the year until Culp gets more detail about its ailing power unit.

GE all but eliminated its quarterly dividend of 12 cents a share to conserve $3.9 billion in cash. Analysts viewed that positively, and Culp said there were no plans to raise equity capital, as some analysts had feared.

“My priorities in my first 100 days are positioning our businesses to win, starting with Power, and accelerating deleveraging,” Culp said in the results statement.

GE shares (GE) were down 10 percent in late trading $10.02. They had been up earlier after the results.

NEW POWER STRUCTURE

Former CEO John Flannery, who was on the job for just 14 months, said in June that GE would pare its focus to jet engines, power plants and renewable energy by disposing of its healthcare and Baker Hughes units, along with other restructuring already in the works.

Culp added on Tuesday that GE will put its gas turbine equipment and services businesses in a new unit, a move analysts said likely foreshadows the sale of other power assets, such as steam turbines, nuclear plants and power grids.

GE took on much of that capability in 2015 with a $10-billion acquisition of power assets from Alstom SA. It argued it could boost margins and profits. But profits fell as demand for fossil power plants slowed in response to cheaper solar and wind systems. Power services faced stiff competition in Saudi Arabia and elsewhere, and use of large power plants has declined, slowing repair revenue.

GE wrote down $22 billion in goodwill because the promised profits from power are now unlikely.

“They are acknowledging that it is not going to turn around in a hurry,” said Paul Healy, a professor at the Harvard Business School who focuses on corporate financial reporting.

Largely as a result, GE reported a loss of $22.8 billion for the third quarter on Tuesday. The power business lost $631 million in the quarter.

Overall, GE posted a loss of $2.63 a share, compared with 16 cents profit a year ago, on a 4-percent revenue decline to $29.6 billion. Adjusted earnings were 14 cents a share, down from 21 cents a year ago. Analysts had expected 20 cents a share, according to Refinitiv data.

Orders at the power division fell 18 percent and revenue fell 33 percent in the quarter. “The only way out of this mess is to restructure power,” said Scott Davis, analyst at Melius Research in New York. “It will bottom eventually.”

GE did not cut its earnings forecast for the year from the most recent $1.00 to $1.07 per share, as some had expected. Analysts have cut estimates for adjusted earnings to 88 cents a share, on average, according to Refinitiv data. A spokeswoman said GE would not hit the old targets, but was not providing new ones just yet.

“I just don’t think Larry has his hands around this fully yet, enough to put his stamp of approval on guidance,” Davis said.

Credit agencies have since cut GE’s ratings, increasing its debt costs, and its financial challenges, which have prompted talk that it will issue stock to raise capital, limit the funds GE has to fix its power division, according to analysts.

CONTINUE READING –>

Advertisements

2 thoughts on “GE Slashes Dividend to 1 Penny, Reveals Deeper SEC Probe

  1. This is the way an exchange listed company operates:
    1. Set the dividend at the lowest level that still does not provoke a revolt by share holders.
    2. Directors talk about a brighter future with some improbable upturn of the company to calm down shareholders.
    3. Directors and board members reward themselves with whatever still left in the coffers leaving the company with just enough fund to survive the next SIX years.
    4. Directors resign with huge golden hand shakes.
    5. After six years, the company goes bankrupt but directors are all blameless !

    https://survivaltricks.wordpress.com/2017/01/25/a-satirical-guide-to-signs-of-an-impending-crash-for-small-investors/

    Like

    • Yes, that’s one possibility. For me, the 1 cent dividend has a different meaning. I think they really expect to bail the company out – not return it to its glory days, but bail it out nonetheless.If they can, then their long string of dividend payouts can be said to have been unbroken.

      I noticed a drastic drop in the quality of their products decades ago, so I wouldn’t shed a tear if GE disappeared. But, I don’t think that necessarily is a done deal. It may stick around in one form or another for a couple more decades.

      Liked by 1 person

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s