General Electric (GE) shares opened sharply lower today after the company warned full-year earnings would likely be at the lower-end of its forecasts.
With oil prices having fallen from $53 to $48 per barrel over the second quarter, GE warned of weaker full-year trading from its unit that serves the oil & gas industry. GE shares were down by as much as 4.5% in early trading.
Oil & gas slump
GE forecast full-year earnings to fall 51% versus 2016 against the slump in its oil & gas unit.
Nevertheless, second-quarter revenue and earnings were modestly ahead of analysts´ consensus forecasts.
Among the bright spots was a 17% jump in revenue from its renewables energy focused unit, though the higher-than-expected quarterly earnings appeared to be largely due to restructuring and cost-cutting measures.
Veteran chief executive Jeff Immelt, who is soon to step down after nearly two decades at the helm, claimed the behemoth was on course to “meet or exceed” its $1bn cost-cutting target for the year, having already reduced structural costs by $670m year-to-date.
“The global scale of the company, along with our ability to innovate industry-leading products and services, will help us navigate the current environment and unlock productivity across our businesses and markets,” added Immelt.
With John Flannery set to take the reins as chief executive from August 1, there is some uncertainty over the company´s longer-term earnings estimates. There is speculation that Flannery may choose to implement a more ambitious restructuring programme.
Flannery, who´s career with GE spans three decades has latterly been charged with running the company´s healthcare arm.