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Why General Electric Stock Dropped 5% Today – The Motley Fool



What happened

Shares of General Electric (NYSE: GE) fell as much as 7.7% in early trading Tuesday before recovering to close the day down 4.7%. The reason: Comments this morning by CEO Larry Culp at the J.P. Morgan Aviation, Transportation & Industrials Conference in New York sent to free fall.

 Man in suit with fingers in his ears

GE is talking again, and investors don't like what they're hearing. Image: Getty Images

So what

What exactly did you say that frightened investors so much? According to TheFly.com, he said that GE is anticipating "significant" headwinds to growing cash flow in 201

9, which will "meaningfully teach" cash production this year. Industrial free cash flow in particular will be "a negative territory" all year long.

The news wasn't all bad. Organic revenue growth should be in the low to mid single digits this year, with GE's healthcare business in particular growing revenues – but not profit margins. Aviation profit margins are also expected to be flat, but the company's core industrial operations will expand profit margins somewhat.

On the other hand, GE's power business will see sales flat down slightly this year, and be a significant source of cash

Now what

It remains to be seen what exact numbers GE is targeting this year, but given the reaction on Wall Street, analysts present at The conference appears to release confidence that GE will hit their projections for the year: $ 118.4 billion in revenue, and $ 0.70 in EPS.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy


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