Sunday, 16 December, 2018

GE shares soar after CEO John Flannery ousted; Larry Culp takes helm

General Electric’s shares lost about half of their value during John Flannery’s tenure General Electric’s shares lost about half of their value during John Flannery’s tenureRICHARD DREW AP
Nellie Chapman | 02 October, 2018, 17:13

Flannery will be replaced by H. Lawrence (Larry) Culp, Jr.

Culp is known as a specialist in turning companies around.

Culp, who is highly respected on Wall Street for a successful transformation of Danaher Corp., will take over immediately, just 14 months after Flannery took the reins. Under Immelt, GE's shares lost more than a third of their value.

Horton said he's looking forward to revitalizing GE as a company with growth and long-term success. "I am excited to get to work".

GE shares are up more than 10% on the news.

GE warned Monday that it will miss its profit forecasts this year and it's taking a $23 billion charge related to its power business.

"It is a privilege to be asked to lead this iconic company", Culp said in a statement Monday.

Flannery took over for longtime CEO Jeff Immelt in June 2017 with the company trying to re-establish its industrial roots, albeit a high-tech version of itself.

Shares of GE last week hit a nine-year low, after news of a glitch in new power-plant turbine technology that temporarily shut two electricity plants in Texas - adding to woes in the company's industrial segments.

With a market capitalisation below US$100 billion as of Friday, GE was worth less than a fifth of its peak value a generation ago.

A year into Flannery's tenure, investors were reportedly concerned he was not working fast enough to restructure the company. Immelt took over from Welch two days before the terrorist attacks in NY and Washington on September 11, 2001.

Recently, investors and other members of the financial community have been concerned about John Flannery's ability to lead GE as the company seems to be headed in the wrong direction.

GE cited "weaker performance in the GE Power business" as one reason for the change at the top. Flannery's time as CEO has been filled with challenges and the company has sold off several businesses in an effort to right the ship. But investors seemed unimpressed, and the stock kept falling even as USA markets notched records. By comparison, Facebook's current value is hovering near $473 billion. He previously served as CEO and president at the conglomerate Danaher between 2000 and 2014. Flannery cut the blue chip stock's dividend in half past year.

Apple became the first US-based company to reach $1 trillion in valuation in August, according to CNBC.

"I "heart" Larry Culp, but a large amount of wood to chop", JPMorgan analyst Stephen Tusa said in a note Monday.

GE now pays an annualized dividend of 48 cents, resulting in a yield of 4%. Capital allocation can include decisions like stock buybacks, acquisitions, and research and development spending. The company said that the goodwill impairment charge is likely to constitute all of this balance.