General Electric weighs on Wall Street

Investors Buy Large Volume of Put Options on SPDR Dow Jones Industrial Average ETF (DIA)

On Friday, the shares of General Electric Co's fell sharply after the company posted its 59% decline in the profits of second-quarter profit and put off their unexpected cut to 2018 earnings targets till the new CEO John Flannery will be 4 months into his job in November.

Jeffrey Bornstein, GE's chief financial officer, defended the timeline in an interview and said the company would have to "play through" any uncertainty created by a review that includes "testing everything we believe". The company is also conducting a review of its portfolio under its new CEO, Darius Adamczyk, which it expects to complete in late September or early October. Oil and gas revenue fell 3% to $3.11 billion but was above the FactSet consensus of $2.93 billion and power revenue increased 5% to $6.97 billion to beat expectations of $6.64 billion, but flat aviation revenue of $6.53 billion missed expectations of $6.70 billion. Its diluted earnings per share (EPS) was $0.15 from operations, but the adjusted earnings was reported as $0.28 per share.

Both GE and Honeywell are facing pressure from activist investors.

GE shares have dropped 16 percent since the beginning of the year, while the Standard & Poor's 500 index has risen 10 percent. Third Point LLC has called on Honeywell to explore selling or splitting off its aerospace business. During its second quarter, GE cut $593 million in costs and said it was on track to meet its $1 billion savings goal. It has eliminated $670 million in spending so far this year. Industrial cash flow was $1.5 billion, much better than in the prior quarter.

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That was about $1 billion worse than the company had anticipated. Revenue fell 11.8% to $29.6bn.

Net profit slumped 59 per cent to $1.34-billion, or 15 cents a share, in the quarter ended June 30, from $3.30-billion, or 36 cents a share, a year earlier.

The company said Flannery will provide an update on GE's 2018 possible predictions later in the year. In the same period a year ago, GE reported EPS of $0.51 on revenues of $33.49 billion.

Imani Moise contributed to this article.

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