General Electric Power Division Profit Plunges
General Electric (NYSE: GE) is facing major issues in its power division. During the second quarter, profit at GE Power, the company’s largest division by revenue, plunged 58 percent year over year. The decline drove overall earnings down by 30 percent last quarter, offsetting strength in other areas of the business.
GE CEO John Flannery has redoubled his efforts to turn around the power division. He said during a conference call, “The biggest challenge we face continues to be working through the turnaround of our power business.” He cautioned that it won’t be a smooth or quick turnaround, saying, “It’s going to be a multi-year fix, with some volatility.” Late last year, the division announced plans to cut 12,000 jobs.
GE is in the midst of a multi-year turnaround plan that has seen it selling off its rail, health care, light bulb and other businesses. The company said it has already cut $1.1 billion of industrial costs this year and it’s on track to meet or exceed its goal to reduce costs by $2 billion. GE plans to use those savings to pay down debt and streamline its remaining businesses.
For the second quarter, the company posted profit of 7 cents per share, down from 10 cents a year earlier. On an adjusted basis, GE earned 19 cents per share, higher than the 17 cents per share expected by analysts surveyed by Thomson Reuters. Second-quarter total revenue increased 3 percent year over year to $30.1 billion, greater than the $29.31 billion predicted.
GE reaffirmed its financial outlook for the year, predicting full-year earnings of $1 to $1.07 per share. It expects its 2018 free cash flow to be at the low end of its forecast. The company’s stock has lost about a quarter of its value this year, sliding 5 percent over the last three months. GE was removed as a component in the Dow Jones Industrial Average in June, after being a part of the index for more than 100 years.