Investors see no benefit yet another year of operating mix of GE CEO Larry Culp. All Culp has done so far is to prevent a liquidity crisis at GE and set the stage for a potential (but highly uncertain) better free cash flow in 2020.
These are absolute admirals of Culp given the cards he received, but not enough to really excited stock investors. And that logic is on full display this week.
The struggling GE said on Monday it would freeze the pensions of 20,000 US officials, a measure that would reduce the pension deficit and cut debt. GE's move is expected to cut the pension deficit by around $ 8 billion and lower debt by up to $ 6 billion.
<p class = "canvas atomic canvas text Mb (1.0em) Mb (0) – sm Mt (0.8 em) – sm" type = "text" content = "GE's stock first appeared on the news, but closed down slightly on Monday's session. The stock fell 3% on Tuesday, leading to a one-year decline under Culp to about 36% according to & nbsp; Yahoo Finance Premium data . "data-reactid = "19"> GE's stock first appeared on the news, but closed down a little on Monday's session. The stock fell 3% on Tuesday, leading to a one-year decline of Culp to about 36%, according to data from Yahoo Finance Premium.
Stuck in a turnaround
Culpes latest move comes as he visits factories to fine-tune how GE operates (with an eye on cost containment), rounding the corner from selling GE's $ 21.4 billion biopharma business to the former employer Danaher and restructure corporate staffing level. Although recent comments from Culp suggest that earnings results for the third and fourth quarters will continue to show a corporate giant stuck in major turnaround mode.
Instead, GE raises long-term insurance reserves ($ 5 billion so far, $ 9 billion to go), repays debt ($ 5 billion tender in October) and supports pension plans ($ 4 billion to $ 6 billion in cash after tax announced Tuesday ). Management has also mentioned repaying loans in GE Capital to the company, "Bank of America Merrill Lynch analyst Andrew Obin wrote after the retirement news.
Obin's sentiment on GE was shared elsewhere on Street.
" We don't perceives tomorrow's announcement as step by step positive, considering that a further $ 5 billion to $ 8 billion of real estate sales revenue must now be channeled toward the pension (against, for example, when GE presented its overall debt reduction target during its March 14 Investor Outlook meeting). During that meeting, retirement had not been a formal focal point for downsizing measures, but has since become so due to falling interest rates, "said veteran GE analyst John Inch at Gordon Haskett.
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