General Electric‘s CEO’ replaced, shares soar

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General Electric Co ousted Chief Executive Officer John Flannery in a surprise move on Monday, replacing him with board member Larry Culp, and said it would take a roughly 23 billion US dollars hit to write off goodwill in its power division, primarily from a large 2015 acquisition.

The struggling energy, health and transportation conglomerate also said it would fall short of its forecast for free cash flow and earnings per share for 2018 due to weakness in its power business, something analysts had expected.

GE shares jumped seven percent to close at 12.09 US dollars as investors bet that Culp could re-energize the GE brand and more quickly transform its portfolio. The stock was the top percentage gainer on the S&P 500.

The shares had more than halved since Flannery, a three-decade GE veteran, became CEO in August 2017 to replace Jeff Immelt, who had led GE since 2001. With a market capitalization below 100 billion US dollars as of Friday, GE was worth less than a fifth of its peak value a generation ago.

GE Power's falling profits last year forced GE to slash its overall profit outlook and cut its dividend for only the second time since the Great Depression.

GE's board, meeting in the last few days, unanimously picked Culp as its new CEO.

Culp, 55, who was named to GE's board in February, was CEO of industrial equipment supplier Danaher Corp from 2000 to 2014, helped grow the company into a broader conglomerate through a series of acquisitions, while increasing earnings.

Some analysts said that GE Power likely missed financial targets for the third quarter, contributing to Flannery's ouster. GE, scheduled to report results on October 25, declined to comment.

The broad strategies are likely to be similar because the plan laid out by Flannery was made in conjunction with heavy involvement from the board, which included Culp, said Gabelli & Co analyst Justin Bergner.

Source(s): Reuters