General Electric shares rise despite 1Q loss
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Slumping industrial conglomerate General Electric won a reprieve on Wall Street Friday after reporting strong results in some divisions even as it suffered a quarterly loss due to a hefty legal charge.
GE, which has been hurt by weakness in its power and oil and gas businesses, reported a first-quarter loss of $1.2 billion, due to $1.5 billion in reserves to cover legal settlements connected to a subprime lending unit it exited.
However, investors took heart after GE reaffirmed its full-year financial targets and avoided fresh negative surprise announcements that have plagued recent results.
Revenues increased 6.7 percent to $28.7 billion.
“The first quarter is a step forward in executing on our 2018 plan and we are seeing signs of progress,” said chief executive John Flannery.
GE has been signaling for months that its encumbered power division would be an earnings vulnerability for some time to come, but Flannery said Friday that the outlook was even worse than previously thought.
The company now expects the overall market for new gas turbine orders to be less than 30 gigawatts, compared with the prior estimate of 30 to 34. Factors driving the weakness include the rising share of renewable energy, energy efficiency efforts and some delays in orders, Flannery said.
Since Flannery became CEO last summer, GE has trimmed costs, streamlined its board, cut its dividend and revamped employee compensation. The company also has announced plans to sell $20 billion in industrial assets.
Flannery reaffirmed he is open to further overhauling GE, raising speculation of a breakup of the company.
“There’s no sacred cows,” he said during a conference call with analysts. “We’re reviewing a number of structures. We’re working through this right now in great detail with the board, including new board members.”
GE was the biggest gainer in the Dow, rising 3.9 percent to $14.54. (AFP)