GE Won't Sell Baker Hughes Stake Yet, Lowers 2018 Profit View -- Update

By Thomas Gryta 

General Electric Co. lowered its 2018 profit outlook Wednesday and said it has no intention of selling down its majority stake in oil services firm Baker Hughes before 2019, a shift from its previous exploration of exiting the business.

GE combined its struggling oil and gas business with Baker Hughes last year to form a new public company. As part of a major restructuring of the industrial giant, new Chief Executive John Flannery said in November that he would explore selling the stake before restrictions lift in 2019.

"Given today's valuation levels, we see a lot of upside there," said Chief Financial Officer Jamie Miller at a Barclays conference Wednesday. "At this point in time, we have no intent to change anything or execute prior to the expiration of any of the lockup periods."

Shares of Baker Hughes rose 1% on the news to $26.76. The company has a market value of about $30 billion. GE owns about two-thirds of the company.

Separately, Ms. Miller warned that 2018 earnings may be at the lower end of previous guidance of $1 to $1.07.

"I think what you should expect is we're probably more at the lower end of that range," she said, pointing to weaker results at the company's GE Capital business.

Analysts already project a shortfall, but the company had backed the earnings projection less than a month ago when it reported fourth-quarter results. The average analyst profit estimate is 96 cents a share for the full year, according to Thomson Reuters.

Ms. Miller said the company continues to cooperate with an investigation by the Securities and Exchange Commission into certain revenue recognition practices and a recent review of its insurance business.

She said the company will have face-to-face meetings with the regulator next month, but that the timeline for a resolution isn't clear.

Since taking the reins as CEO in August, Mr. Flannery has cut the dividend and financial projections while pledging to shed at least $20 billion in assets. Mr. Flannery says he wants to simplify the company and is also considering bigger moves including separating the core divisions -- health care, aviation and power -- in what would amount to a breakup of the industrial giant.

GE is working on more than 20 deals to rearrange its portfolio of businesses. It expects to cut costs by more than $2 billion in 2018 -- more than the $1.7 billion cut in 2017 -- and will soon announce a revamped board of directors.

Write to Thomas Gryta at [e-mail]

(END) Dow Jones Newswires

February 21, 2018 17:47 ET (22:47 GMT)

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