GE Stock Soars After CEO John Flannery Unexpectedly Ousted

GE CEO John Flannery

GE CEO John Flannery

Turning a big ship takes time, but GE lost faith in its captain.

GE has been hobbled by years of poorly timed deals and needless complexity that predate Flannery's tenure as CEO.

The profit disappointment and massive accounting writedown are just the latest in a long line of misses dating back to the leadership of Jeff Immelt, who led GE between 2001 and June of past year.

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 company expects to take a non-cash goodwill impairment charge related to the GE Power Business.

GE doubled down on fossil fuels in 2015 under Immelt with the $10.3-billion purchase of French group Alstom SA's power business.

Culp said, "GE remains a fundamentally strong company with great businesses and tremendous talent". "However, we believe that CEO Culp will, at a minimum, re-baseline the company, drive execution and make long-term decisions that benefit the company and shareholders".

Flannery's exit was met with surprise and celebration on Wall Street.

In addition to adding Culp to the board, GE also appointed Thomas Horton, the former chief executive of American Airlines and AT&T, as lead director - citing his experience with corporate restructuring in the merger of American and US Airways.




Culp, 55, is credited with leading a turnaround at Danaher, which makes everything from dental tools to consumer packaging.

The announcement of Flannery's departure sent GE's stock price sharply higher in pre-market trading. Longtime CEO Jeff Immelt was replaced by Flannery, a 30-year GE veteran, in August 2017.

In June, Flannery made good on that promise when GE said it would spin off its health-care business and sell its interest in Baker Hughes, a massive oil services company. Investors were reportedly frustrated by how long it was all taking in the face of mounting debt and profit shrinkage.

"Investors grew impatient with the lack of improvement and with the sheer scale of the problems uncovered; however, these problems were not created under his tenure", CFRA Research analyst Jim Corridore said in a note.

GE has continued to struggle, including with a recent issue with problems with turbines in its important power unit.

GE, an original member of the Dow since 1896, was booted from the exclusive index over the summer. With a market capitalization below $100 billion as of Friday, GE was worth less than a third of its value in 2007.

GE's valuation, based on price-to-earnings ratios, also has declined, making the shares far cheaper than those of rival diversified industrial companies.

Culp, for his part, tried to sound optimistic.

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