Shares of industrial giant General Electric Company (NYSE: GE) dropped as much as 8.2% in trading Monday after the company announced a dividend reduction and reduced guidance. Shares slipped throughout the day and were down 8% at 2:50 p.m. EST.
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The dividend will be reduced from $0.24 per share quarterly to $0.12 per share, saving the company about $4 billion per year. A dividend cut was widely expected, but the scale of the cut may have caught some investors by surprise.
What really shocked the market was an adjusted earnings per share (EPS) guidance for 2018 of $1.00 to $1.07 per share, down from an earlier forecast of $2 per share. Analysts were expecting $1.17 per share in earnings.
As new CEO John Flannery lays out his vision for the company, he plans to sell $20 billion in assets and will likely undo GE's controlling stake in Baker Hughes (NYSE: BHGE), which was a venture formed just last summer.
Flannery's goal is to focus GE's business on aviation, power generation, and healthcare, reducing exposure to energy and financial markets. A smaller GE may be better long-term, but the profit and dividend reduction shows just what dire straits the company is in right now. Large, industrial products don't hold the pricing power or generate the kind of demand they did a decade ago. In some ways, the world is passing General Electric by.
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