General Electric Announces Coronavirus' Impacts On Its Business
Zacks Investment Research | Mar 23, 2020 10:48PM ET
General Electric Company (NYSE:GE) yesterday provided an update on measures that intends on taking in the light of the coronavirus (COVID-19) outbreak. The conglomerate’s chairman and CEO — H. Lawrence Culp, Jr. — stressed on workers’ safety, the continuation of providing services to customers, and preserving the business strength during the difficult period.
It is worth noting here that General Electric’s share price decreased 6.3% yesterday, eventually closing the trading session at $6.11.
Inside the Headlines
To begin with, the company noted that the aviation industry globally has been hit hard by the coronavirus outbreak. Commercial airlines grounded flights as demand plunged due to the pandemic.
Its GE Aviation intends on lowering the U.S. workforce by 10%, while its president and CEO — David Joyce — will give up 50% of his salary, beginning April 2020. Also, other actions, including the reduction in the contingent workforce, refraining from hiring and lowering spending (non-essential), are being considered. In the coming three months, maintenance, repair and overhaul (“MRO”) activities will be hurt badly, resulting in no work for 50% employees. General Electric believes that the actions will result in cost savings of $500 million to $1 billion for 2020.
Additionally, H. Lawrence Culp, Jr. noted that GE Healthcare is experiencing lower demand for equipment used in medical procedures (due to either cancellation or postponement of elective procedures). However, the production of scanning and other monitoring products (including mobile X-ray systems, ventilators, CTs, patient monitors and ultrasound devices) have been increased by GE Healthcare. The initiatives have been taken to help better diagnose patients infected with the coronavirus.
Along with the decision to give up salary for 2020, the company’s Chairman and CEO — H. Lawrence Culp, Jr. — noted that the divestment of the BioPharma business to Danaher Corporation (NYSE:DHR) will help strengthen the financial position of General Electric.
Recent Developments
Notably, the divestment of the BioPharma business received a green signal from the U.S. Federal Trade Commission (“FTC”) recently. With the approval, all antitrust requirements for the deal are complete. The divestment will close on Mar 31, 2020.
Also, General Electric communicated that its first-quarter 2020 results will likely reflect the adverse impacts of the virus outbreak. The company anticipates $300-$500 million adverse impacts of the virus on its Industrial free cash flow and $200-$300 million on its operating profit.
Zacks Rank, Share Price Performance and Earnings Estimates
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General Electric currently has a market capitalization of $57 billion and a Zacks Rank #3 (Hold).
The company’s share price has decreased 45.4% in the past three months compared with 39% decline recorded by the Original post
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