The Truth Will Set You Free

Jake Keelen-Brown | jlb7226@psu.edu | 14 March, 2019

On Thursday, the board of directors at General Electric (GE) announced during a conference call that the company expects the 2019 financial year to have weaker cash flows and lower profits than expected. The executives went into detail stating that this year is all about cutting the companies costs and debt.

This conservative expectations for the year does not have any of GE’s investors rattled. Most of the companies investors have bought into the company with the expectation of a long term overhaul. The companies stock even closed up $0.28 to $10.30 on 3/14.

GE said it does not expect to close any major facilities as a way to cut costs. However, it has cut 34% of its workforce at power manufacturing plants in Schenectady, N.Y., and Greenville, S.C. Last year GE cut 10,000 corporate workers from a force that 28,000 at the end of 2017.

There was a sense of positivity to come out of the conference call. GE said that even though it expects 2019 to be a quote on quote “reset year,” they expect to turn around in the right direction during 2020. With the improvement to its operations and sales the company expects to have a positive cash flow in 2021.

GE has done a very gusty and rare move when it comes to Wall Street, it told the truth. The company has put out expected earnings that are well below the forecast that the market had. This transparency allows no one to be surprised when the company is burning through cash that it doesn’t have.

Anyone looking to invest in GE knows that the company has a long way to go to recapture the dominance it once showed as early as two years ago. Of course it will be a huge risk to trust the companies new leadership to right the ship. As we all know though if you decide to take that risk and it does turnaround the payoff can be humongous.

One may look at GE and what is doing in the business world currently and see similarities to another part of the world... the sports world. This week the New York Giants traded their star wide receiver, Odell Beckham Jr. This move essentially gives the impression that the Giants like GE are in a “reset year.” One thing is for sure, only time will time if these moves will actual pay dividends.

Sources:

https://www.wsj.com/articles/ge-warns-of-another-year-of-falling-profits-11552562787?ns=prod/accounts-wsj