Friday , August 19 2022

In the world's largest company, 86%


A giant in distress

In June, General Electric announced that Dow Jones,

In June, General Electric left the Dow Jones for more than 100 years as an optional American member. At that time, the title of the biography was moving in the $ 13 area, and it seemed difficult for the situation to deteriorate.

However, the market took only five months to prove that this assumption is inadequate. Since the index ended, the company fell 34% and JP Morgan still did not reflect the company's situation despite a 74% decline since May 2016

This was the final blow of the company being traded early in 2009. At the beginning of the millennium, utilities were named the world's highest market value company with $ 600 million in capital. Now this figure has been reduced to $ 75 billion, much lower than the $ 300 billion that was worth two and a half years ago. So, at the historical high point of things, the behavior of the company falls by 86%.

Jack Welch was the top man on General Electric. As CEO of the company for 20 years, the value was over $ 13 million to over $ 400 million. It is different from the way that electricity comes out after coming out.

According to Bloomberg data, Who bought the company's stock on September 7, 2001, He was the day Jeff Immelt became CEO and president.abrá suffered a loss of 63% including dividends. This figure is much more in line with the performance of the S & P 500 since then: 260% in the same period. It was replaced by John Flannery, who was replaced by Lawrence Culp in 2017, almost 16 years under the control of Jeff Immelt. But what are the new CEOs facing?

1. High debt. According to FactSet data, the company has accumulated nearly $ 1 billion of net debt. Multinational corporations have set a goal of 2.5 times the debt / EBITDA ratio in 2020. But on October 1, when Lawrence Culp arrived, this goal disappeared. "Culp 's financial priorities include grade A. He currently holds A2 in Moody' s and BBB + in S & P, and at some point has lowered his debt / EBITDA ratio to less than 2.5 times Management does not expect this to happen by 2020, so the deleveraging rate appears to have slowed, "explained RBC Capital Markets.

2.- Reduction of dividends. One of the actions taken by the new CEO is to cut back the company's dividends. Specifically, 2019 plans to distribute 4 cents a share from 48 cents now. This assumes an almost anecdotal 0.5% profitability and experts believe that they have not completely canceled dividends so that they can be in the universe of funds that can only acquire ownership to distribute dividends.

"With this cut, the company will be able to protect itself from forced sales," said RBC Capital Markets. "This means we can cut dividends and save $ 39 million each year." Already in 2017, the company has reduced dividends by half, but this exercise alone is not enough.

3. Regulatory agency investigation. Of course, the problem with the company is not trying to exclude the same thing by reducing it to high debt or cutting dividends. General Electric warned in January that the US regulator is working on an energy sector accounting report and a $ 6.2 billion policy portfolio. At present, the company has acknowledged that the SEC has extended its investigation into a $ 22 million emergency in the energy sector.

Weak business. Thus, the results of the General Electric in the last quarter were much weaker than expected. Adjusted earnings per share was $ 0.14, down 30% from analyst estimates, while bills were down 4%. Also, without adjustment, the company lost $ 2.63 per title.

According to analysts, the only business that maintains the company's performance is air, and the energy, renewable and oil and gas businesses can not get on track. "We see the same power as in the previous quarter, which includes much lower energy and renewable energy results than expected and good aerial results." Without guidance, it is difficult to judge the sustainability of each department. "As bulls think, they are not safe and do not think the aircraft can withstand this type of result," JP Morgan says.

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