The stock of General Electric (GE 21.95, -1.66, -7.0%) is down 25% year-to-date versus a 17.2% gain for the Dow Jones Industrial Average and a 14.4% gain for the S&P 500. That's a miserable performance, and just when you think it can't get any worse, it is.
Shares of GE are trading 7% lower in pre-market action after a dismal third quarter report and full-year outlook from the fallen industrial giant.
Expectations were already depressed ahead of the report, which made it all the more shocking when GE didn't even come close to meeting analysts' average third quarter earnings expectations.
Specifically, GE's non-GAAP industrial + verticals earnings per share declined 9% to $0.29, or roughly 40% less than the consensus estimate, as its industrial operating margin contracted 220 basis points to 11.8%. Total revenues of $33.47 billion were up 14% year-over-year, yet organic revenues for the industrial segment decreased 1% to $26.9 billion.
GE's cash flow from operating activities for the nine months ended September 30 plunged 78% to $4.1 billion.
GE described the quarter as a "very challenging quarter," pointing to the particular difficulties for its largest segment -- Power -- in a difficult market. The Power segment recorded a 4% decline in revenue of $8.68 billion and a 51% decline in segment profit of $611 million.
The challenges for that segment, and GE's overall business, were captured in a sharp downward revision to GE's full-year 2017 non-GAAP earnings per share outlook, which was slashed from a range of $1.60-$1.70 to a range of $1.05-$1.10.
The lowered guidance underscores why new CEO John Flannery has been busy implementing management changes and cost-cutting efforts, yet GE has the semblance right now of a company that is in distress.
Accordingly, the earnings results and guidance are poor and investors have been left to wonder if a dividend cut is in their future.
If one was to happen, now seems like the right time to do it because it can be categorized as part of a total overhaul under new leadership aimed at putting GE back on the right growth track that will enable it to deliver better earnings and higher dividend payments in the future.
The company plans to provide an update on its strategy and 2018 framework on November 13. Maybe that will help bring goods things to life again for its stock, which has been left for dead in this year's run to a record high for the stock market.