General Electric Co. CEO Jeffrey Immelt, under pressure from activist investor Trian Fund Management to boost performance, is giving shareholders little reason for optimism.
The industrial giant will have to stretch to meet a goal of earning $2 a share next year as it contends with a tough oil market and headwinds in equipment pricing, Immelt said on May 24 at the Electrical Products Group conference in Longboat Key, Fla.
“We have to underwrite 2018 assuming that the resource markets don’t get better,” he said. In that case, earnings of $2 a share “would be at the high end of the range.”
The obstacles add to the pressure on the CEO after several quarters of weak results and an 11% slide in the stock this year through May 23.
Trian, one of GE’s largest shareholders, has called on Immelt to reduce costs and improve operations. GE said it would cut management bonuses if it fails to meet certain financial goals.
Trian said last month that GE had a path to earn as much as $2.33 a share next year if it hits cost targets and continues to generate sales growth. That suggestion contrasted with increasingly bearish analysts, who anticipate earnings of $1.88 a share, according to the average of estimates compiled by Bloomberg. Trian didn’t immediately respond to a request for comment.
GE turned negative as Immelt spoke. The shares fell 1.5% to $27.87 at 12:27 p.m. in New York, erasing gains in earlier trading.
Immelt, 61, declined to detail his future plans when asked about succession, saying “we’ve got a very deep bench.”
Now in his 16th year at the helm, the CEO is trying to arrest this year’s stock slide as investors look for a payoff from the widely praised shift he led in recent years away from finance and toward industrial manufacturing. Spotty global economic conditions and an oil-industry slump have kept pressure on sales and cash flow.
After Deutsche Bank AG downgraded the stock this month, Boston-based GE closed as low as $27.41 last week, a level not touched since October 2015.
“Nobody likes how the stock’s traded this year, but it’s up to us to execute,” Immelt said.
By Richard Clough