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General Electric (GE – Free report) announced Monday that he would replace CEO John Flannery – who had held this position for a little over a year – by outsider Lawrence Culp, who serves on the board of directors. from GE since April.
Investors welcomed the decision, as GE's shares rose more than 14% as markets opened up, before reducing these gains somewhat and closing at $ 12.09 / share, up 7% on the first quarter. day.
GE had lost more than 50% of its market capitalization since Flannery took the reins in August 2017.
The board of directors was reportedly frustrated by the lack of results related to Flannery's turnaround plan for the company, which aimed to reduce the company's clutter in several underperforming businesses and focus on three areas. keys: aircraft engines, power generation and wind power. turbines.
Last member of the original Dow Jones industrial average, GE figured in the first-order stock index since 1896 before being replaced in June, having lost more than three quarters of its market capitalization since 2004 – year during which he was briefly the most productive. American value company with a market capitalization of $ 400 billion north.
Founded in 1889 – with the help of what was soon to become JP Morgan & Co. – GE began by consolidating Thomas Edison's interests in several companies in the electricity sector. Over the next century, she created or acquired businesses in a wide range of industries including audiovisual entertainment, computer science, oil and gas exploration, healthcare, and a variety of banking and financial services through her GE division. Capital.
Although this level of diversification was praised when almost all units were working well, it has become a handicap in recent years. During Flannery's tenure, the company recorded a significant reduction in earnings, a survey of its financial division's questionable lending practices, a significant dividend cut, and, recently announced, a charge of approximately $ 23 billion. dollars in its power generation division due to material defects in manufactured turbines.
GE's new CEO, Culp, was the head of the Danaher Industrial Science & Technology conglomerate from 2000 to 2014, during which time Danaher's market capitalization was multiplied by five. He was widely recognized for his strategic strategic acquisitions, which is in a way the opposite of his role at GE, which seeks to yield and focus on its key strengths.
Even if he succeeds, Culp is likely to take a tough quarter of time as he makes tough decisions as to how to clean up the mess left by more than a decade of underperformance in many divisions. Although the estimates for 2018 and 2019 remain virtually unchanged over the last 60 days and GE ranks 4th in Zacks, stock action now indicates investors are optimistic about Culp's prospects. to raise the bar of this gigantic industrial giant.
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