General Electric Makes Huge Changes in Top Management

General Electric Company

The industrial giant General Electric Company (NYSE: GE) which is facing massive headwinds in various segments of business has reported a decline of 48% Y-O-Y in non-GAA earnings to an amount of $2.418 billion or $0.28 per share on total revenues worth $29.558 billion during the second quarter of 2017. General Electric has also curtailed the fiscal earnings of 2017 below the estimates of the analysts.

Likewise, GE stocks have lost approximately 30% since June this year to trade at $23 levels. There was a massive shakeup in the top management of the company last Friday. These changes are meant for the well being and benefit of the company in the long term. But we expect the stocks of the company to decrease in the short time, and the reasons for the same are discussed below.

This Boston, Massachusetts-based company has declared a slew of high profile departures. By the end of this year, Jeffrey Bornstein, the CFO of the company will no longer be the part of the company. His post will be succeeded by Jamie Miller from November 1, 2017, who at the moment is holding the position of Head of GE Transportation.

While talking about his resignation, Bornstein commented that it is the perfect time to appoint a new Chief Financial Officer with a fresh perspective that can help benefit the company from the current quagmire and improve the overall performance and increase the value of share price.

General Electric

John Rice and Beth Comstock who are the Vice Chairman of General Electric have also announced their retirement. In June 2017, Steve Bolze who held the post of Power Division had resigned, and John Flannery was named as the next Chief Executive Officer of the company.

General Electric is known for its power segment. Last year, the company was able to generate 28 percent of its revenue from this segment of the business with gas turbines being the primary product offering. H Class turbine of GE has created a record for its efficient work and is the primary reason for the growth of the company in power segment. But this particular segment faces stiff competition from Siemens AG. The gross margin has diminished from historical average of 5 percent to mere 1 percent.

Both these companies have agreed on their overcapacity in gas turbine sector. Recently, Siemens has announced that it would test the new HL class turbine at Duke Energy site. Siemens is hopeful that the turbine will start working with the efficiency of 63 percent and will reach a maximum of 65 percent. It would undoubtedly increase the pressure on the power segment of General Electric which is now on a decline in backlog all because of a cyclical slowdown.

Flannery is under a lot of pressure from the activist shareholder “Trian Fund Management” and working hard to revitalise the 125 years old company. To bring the company on track, General Electric is working on a cost cut program that can save up to $2 million by the end of 2018. As for cost-cutting measure, General Electric has already grounded its fleet of cars and jets that were used by the executives. It will undoubtedly take time to fill the vacuum created by the exit of senior people at GE, and the stocks are expected to remain under selling pressure.

General Electric Stock Price: October 11th 2017

General Electric Stock Price: October 11th, 2017

If you look at the above price chart, it is showing a massive resistance at 24.50. In addition to this, the stock is decreasing along the resistance level. The stochastic oscillator is also reducing and its tell about the bearishness of the share. Hence, we speculate the stocks of General Electric to decrease for the time being.

To benefit from the decline, we recommend traders to buy a put option and select expiry period of 7 days. Strike price around $23.50 would be ideal for this trade.

Rich Archer

Rich Archer

Hi, my name is Rich Archer. I am living in London. Welcome to Binary Manual. Reach to Binary Options broker reviews and market news here.


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