General Electric (GE -5.5%) is trading at a five-year low as the company hosts its Investor Day.
New CEO and Chairman John Flannery inherited quite a mess from Jeffery Immelt. The stock is down 39% year-to-date vs. a 13% gain in the Industrial sector ETF (XLI).
John Flannery made the decision to cut the dividend 50%. It was a highly-anticipated move in the face of weak cash flow.
GE guided for fiscal 2018 earnings of $1.05-1.07/share, below estimates and below the $1.05-1.10 guidance for 2017. GE sees $6-7 billion in free cash flow next year.
The Power business is the primary culprit for the weak outlook. Power revenue is expected to fall 10% next year. Aviation and healthcare are the other core businesses.
Stepping back, GE made a number of poor decisions in last decade. The conglomerate expanded in to the healthcare and energy businesses near a top and exited NBCU and many of its financial business near a bottom. GE plans $20 billion more in divestments in the coming years, including the transportation business, the light bulb business and Baker Hughes (BHGE).
GE is now trading at ~20x next year's earnings estimates with a $168 billion market capitalization and a 2.5% dividend yield.