Anything For You All: General Electric spikes after saying it's shrinking its debt and agreeing to a settlement over its obsolete subprime-mortgage business

Kamis, 31 Januari 2019

General Electric spikes after saying it's shrinking its debt and agreeing to a settlement over its obsolete subprime-mortgage business

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General Electric spikes 8% after saying it's shrinking its debt and agreeing to a settlement over its obsolete subprime-mortgage business

General Electric posted mixed fourth-quarter results Thursday morning, beating on the top line and missing on the bottom line.
The conglomerate said its strategy was going to plan as it continued its deleveraging process, starting with GE Power.
GE also said it had reached an agreement in principal with the Department of Justice regarding its obsolete subprime-mortgage business, WMC.
Shares were up more than 8% following the report.
Watch General Electric trade live.

General Electric posted mixed fourth-quarter results Thursday morning, but shares were up more than 13% as the company made progress on deleveraging its power business and announced it had reached a settlement in principal with the Department of Justice regarding its former subprime-mortgage business.

The conglomerate earned an adjusted $0.17 a share, missing the $0.22 that analysts surveyed by Bloomberg were expecting. Revenue climbed 6% versus a year ago to $33.28 billion, edging out the $32.67 billion that was anticipated.

"Our strategy is clear: de-leverage our balance sheet and strengthen our businesses, starting with Power," GE's chairman and CEO, Larry Culp, said in the earnings release.

"To do this, we are improving execution, customer focus, and how we set priorities across GE. I'm confident in our team, technology, and the global reach of GE's brand and relationships. We have more work to do, but I'm encouraged by the changes we're making to strengthen GE and create value for our shareholders, customers, and employees."

In June, General Electric announced a massive reorganization, saying it would spin off its healthcare business and split from the oil giant Baker Hughes. It also said it would reduce its debt by $25 billion in an effort to shore up its balance sheet.

GE's power unit saw revenue fall 25% year-over-year to $6.76 billion as its deleveraging process continued. The company said the business was "negatively impacted by continued execution and operational issues on equipment projects and transactional services."

Last October, GE announced it was taking a $23 billion write-down on its power business, which it was also splitting in two, and slashing the company's dividend to a penny. It also replaced John Flannery with Culp as GE's chief executive.

GE Capital sold off $8 billion of assets in the quarter and brought its debt load down by $21 billion, the release said. GE also announced that it reached an agreement in principal for a $1.5 billion settlement with the Department of Justice over WMC, its defunct subprime-mortgage business.

"The GE story is about a transfer of asset value away from the equity holder — more of a salvage situation than about equity value creation," the JPMorgan analyst Stephen Tusa said in a note out Monday after the company announced an unfavorable revision for shareholders in the planned merger between the rail-transport company Wabtec and GE Transportation.

In December, Tusa ditched his long-term bear view on the stock, saying there was a "balanced risk reward at current levels." He has a "neutral" rating and a $6 price target — 34% below the $9.10 where shares settled Wednesday.

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