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HON Honeywell International Inc

230.94
0.00 (0.00%)
Pre Market
Last Updated: 00:00:00
Delayed by 15 minutes
Share Name Share Symbol Market Type
Honeywell International Inc NYSE:HON NYSE Common Stock
  Price Change % Change Share Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 230.94 0 00:00:00

GE Leaves Investors in Limbo -- 6th Update

22/07/2017 1:09am

Dow Jones News


Honeywell (NYSE:HON)
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By Thomas Gryta 

General Electric Co., a company in transition that also is changing its CEO, told investors Friday that they'd have to wait four months to hear the new boss's strategy for boosting results.

GE investors, who have missed out on the broader stock market's rally, were in no mood to be patient. Shares of the Boston-based conglomerate fell nearly 3%, leaving the stock 18% below where it started the year.

GE, its profits under pressure, improved its cash flow and ramped up cost-cutting efforts -- two areas of investor concern -- in Chief Executive Jeff Immelt's last quarter at the helm. The bad news from investors' point of view was that GE tempered profit expectations for the current year and said investors would have to wait until mid-November for CEO-designate John Flannery to discuss the outlook for 2018.

It is unusual for a big company, especially one such as GE that is being pressured by an activist investor to improve its performance, to ask shareholders and customers to wait so long to learn about its gameplan.

"This is a strange situation," said Nicholas Heymann, analyst with William Blair & Co. "This increases the duration of the period of uncertainty."

On a conference call Friday, analyst Deane Dray of RBC Capital Markets asked if GE would be in "limbo" until November. Mr. Flannery said the financial framework for 2017 is set and that he is "not worried that we're going to be, you know, dead in the water in the meantime."

Mr. Immelt will step down at the end of this month after 16 years as CEO.

GE is under increasing pressure to show that its pivot away from financial services, big bets on the oil industry and a renewed focus on making jet engines and power turbines would be good for investors.

Shares fell 2.9% to $25.91 each in Friday trading.

Mr. Flannery, who formerly ran GE's health-care unit, is meeting with small groups of investors and visiting the business units of the roughly 300,000-person company.

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 notion that [Mr. Flannery] is going to get his arms around this in a month is a fallacy," Mr. Bornstein said in an interview. "I don't think asking for four or five months to do this is asking a lot."

On Friday, GE backed its prior 2017 projection of earnings of $1.60 to $1.70 a share and organic sales growth of 3% to 5%, but it warned that profit would be on the weak side. "Given our outlook on oil and gas and power, we are trending to the bottom end of the range," Mr. Bornstein said on the conference call.

Analysts are skeptical that GE will reach a goal of delivering $2 a share in profit in 2018, but the company said an updated target wouldn't come until after Mr. Flannery's review.

"This was almost like a funeral dirge today. There was nothing positive, " said Brian Langenberg, industry strategist at Langenberg & Co. "I can't think of anything in November that is going to make me thrilled."

Meanwhile, industrial conglomerate Honeywell International Inc. on Friday reported a stronger quarterly profit and raised the low end of its 2017 earnings outlook. The company is also conducting a review of its portfolio under new CEO Darius Adamczyk which it expects to complete in late September or early October.

"We are very conscious of not letting this slow us down," said Chief Financial Officer Tom Szlosek in an interview. "We think we do a good job of keeping our businesses out of it."

Strength in its aerospace division as well as its home and building-technologies business helped Honeywell's latest results. The company's profit rose 6% to $1.4 billion in the second quarter, while revenue climbed about 1% to $10.08 billion.

Honeywell shares gained 1% to $136.35 Friday, leaving it up 18% on the year.

Both GE and Honeywell are facing pressure from activist investors. GE pledged to boost its cost-cutting program earlier this year after discussions with Trian Fund Management LP, which has been frustrated by missed profit goals at GE. Third Point LLC has called on Honeywell to explore selling or splitting off its aerospace business.

On Friday, GE said it cut $593 million in annual industrial costs in the second quarter and is on track to meet or beat its $1 billion savings goal by the end of the year. It has eliminated $670 million in spending so far this year.

Despite re-examining its spending, GE said it won't consider reducing its dividend payout, which Mr. Bornstein called the company's "single most important capital allocation item."

Cash flow in GE's industrial segment was a positive $1.5 billion after a shocking negative $1.6 billion for the first quarter. The company backed its full-year cash-flow target of $12 billion to $14 billion but said it would also be at the low end of the projected range.

In all, GE's second-quarter earnings fell less than expected, with much of the drop reflecting a year-earlier boost from the sale of its home-appliances business. The company reported a profit of $1.19 billion, or 15 cents a share, down from $2.76 billion, or 36 cents a share, a year earlier. Revenue fell 12% to $29.56 billion.

Imani Moisecontributed to this article.

Write to Thomas Gryta at thomas.gryta@wsj.com

 

(END) Dow Jones Newswires

July 21, 2017 19:54 ET (23:54 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.

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