General Electric Co. seemed to be getting back on track under a new leader earlier this year, avoiding many of the missteps that had plagued the company in recent years. But returning the one-time titan to health still looks to be a heavy lift.
The shares fell sharply Friday, extending a steady drop this month as investors digested GE’s second-quarter results, which showed strains on cash flow and the traditionally strong aviation business. Declining interest rates are also weighing on the company’s pension obligations.
John Inch, an analyst with Gordon Haskett and prominent GE bear, expressed concerns about cash flow despite GE’s recent decision to increase its 2019 forecast. Excluding a factoring business that is being wound down, “the company’s operating performance has shown more substantial deterioration,” he said in a note to clients Thursday.
GE has been grappling with cash headwinds since before Larry Culp took the reins as chief executive officer in October. The former Danaher Corp. boss has made progress in reducing GE’s debt, addressing operational challenges and boosting cash, including a sale of Wabtec Corp. shares this week that will bring in about $1.5 billion. Culp himself has said GE’s turnaround effort will be a “multiyear transformation.”
Investors are getting antsy. GE fell 3% to $9.21 at 12:26 p.m. in New York, on pace for the seventh decline in the past eight sessions. Since July 30, the day before GE reported quarterly earnings, the shares are down 13%ーthe second-worst performance in a Standard & Poor’s index of industrial stocks.
Despite the recent decline, GE is still up more than 25% so far this year. The company’s market value, currently at $80 billion, plunged more than $200 billion during the two years ending Dec. 31.
By Richard Clough