New GE Chief Slashes Forecasts, Plans to Exit $20 Billion in Businesses -- 2nd Update

By Thomas Gryta and Cara Lombardo Features Dow Jones Newswires

General Electric Co. slashed its 2017 projections as new Chief Executive John Flannery's started to outline his restructuring plans, setting a goal to exit more than $20 billion of the struggling conglomerate's businesses.

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Mr. Flannery, who came into the job in August and recently became chairman with the early exit of Jeff Immelt, has expressed an urgency to reduce costs and rethink the sprawling company. In addition to lowering earnings targets, the company Friday cut its forecast for 2017 cash flow by half from a July projection.

GE shares dropped 6% in premarket trading Friday after closing Thursday at $23.58. The stock had fallen 25% this year.

The Boston company's third quarter earnings fell as it incurred hefty restructuring charges, reporting a profit of $1.8 billion, down from $2 billion a year earlier. Excluding restructuring charges and other items, adjusted per-share earnings fell to 29 cents from 32 cents, still well below Wall Street expectations of 49 cents.

Impairments and restructuring charges during the period dented GE's per-share earnings by 16 cents.

Mr. Flannery is slated to update investors at a Nov. 13 meeting on the details of his strategic review. He has already been cutting jobs, research operations and executive perks, like corporate jets.

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In a presentation accompanying Friday's results, GE said it is looking to streamline its portfolio of businesses by more than $20 billion in the next 1 to 2 years, without providing details.

The company lowered its adjusted 2017 per share profit target to $1.05-$1.10 from a previous view of $1.60-$1.70. Analysts currently expect earnings of $1.53 a share in 2017.

Cash flow from operating activities is now projected to be about $7 billion, a steep revision from the previous view of $12 billion to $14 billion, with a big part of the drop coming from the power division.

GE is ahead of its goal to cut $1 billion in industrial costs this year, cutting $500 million in the third quarter and hitting $1.2 billion for the year so far. Earlier this year, GE set a goal to cut $1 billion in such costs this year and next, under pressure from activist investor Trian Fund Management, which recently gained a seat on the company's board.

"This was a very challenging quarter," Mr. Flannery said in a statement. "We are focused on redefining our culture, running our businesses better, and reducing our complexity."

He has already called on company leaders to review their divisions and plans to streamline the company's global research efforts, which could include shutting down research centers in Shanghai, Munich and Rio de Janeiro, people familiar with the matter have said.

GE's revenue jumped 14% to $33.5 billion in its third quarter, up from $29.3 billion a year earlier. Analysts had expected revenue of $32.56 billion, boosted by a merger of GE's oil-and-gas unit with Baker Hughes.

Oil-and-gas revenue rose 81% from a year ago driven by Baker Hughes; without the new assets, revenue fell 7%. Revenue growth was mixed with aviation and health care businesses expanding, but power, lighting and transportation all shrinking. Transportation revenues dropped 14%.

Write to Thomas Gryta at thomas.gryta@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

(END) Dow Jones Newswires

October 20, 2017 08:07 ET (12:07 GMT)