General Electric’s (GE) shares were down 7.5% in mid-day trade on Wednesday, a day after J.P. Morgan analyst Stephen Tusa said his price target of $6 was looking generous, following GE’s gloomy forecast for this year.
At the J.P. Morgan conference on Tuesday, GE CEO Lawrence Culp Jr. indicated that the company’s industrial free cash flow will be negative in 2019.
At the conference, GE laid out its priorities for 2019. The topmost is to improve its financial position. The company’s decision to sell its biopharma business to Danaher for $21 billion is part of these efforts. GE also reduced its dividend and is undertaking industrial dispositions worth $20 billion. The firm aims to prioritize cash generation in every business.
The second priority is to strengthen its businesses, starting with Power. The business has been facing non-operational headwinds along with execution challenges in terms of project underwriting and cost over-runs. GE plans to take additional actions in 2019 to right-size Power’s footprint.
GE’s initial thoughts for 2019 include an expectation for organic revenue growth in the low to mid-single digit range, and strong performance in Aviation and Renewables. The company expects organic growth in the low to mid-single digit range in Healthcare. Power is expected to be down in a flat to slightly down market.
GE is expected to provide an outlook on March 14, 2019 and the stock is likely to experience some volatility at that time.