October 1, 2018 Read More →

Problems at GE power unit prompt CEO shuffle, major impairment charge

Business Insider:

John Flannery is out as the head of General Electric after just more than a year at the top of the company. He will be replaced as chairman and CEO by H. Lawrence Culp Jr., who served as the CEO and president of Danaher Corporation from 2000 to 2014. Culp has been a GE board member since April. GE shares are up more than 13% on the news.

GE said it would take a $23 billion goodwill charge for its power business. “GE expects to take a noncash goodwill impairment charge related to the GE Power business,” a company release said. “GE Power’s current goodwill balance is approximately $23 billion and the goodwill impairment charge is likely to constitute substantially all of this balance.”

In its second-quarter earnings report, the company said profit from its power business dropped 58%, but it was able to match expectations with solid earnings growth in its aviation and healthcare businesses. Flannery said he expected the power business to “remain weak through 2020.”

The conglomerate also warned that it would miss its 2018 earnings guidance. In July, the company reiterated it expected to see adjusted earnings of $1 to $1.07 a share. “While GE’s businesses other than Power are generally performing consistently with previous guidance, due to weaker performance in the GE Power business, the company will fall short of previously indicated guidance for free cash flow and EPS for 2018,” the release said.

More: General Electric removes John Flannery as CEO, says it will take a $23 billion charge to its power business

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