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GE Tumbles as JPMorgan Says 2018 Outlook 'Not a Credible Number'

Rick Clough

General Electric Co. renewed its slide after a report from JPMorgan Chase & Co. said the beleaguered manufacturer may fall short of already lowered earnings expectations.

Challenges in the power and renewable-energy operations suggest the company will bring in less free cash flow than its current forecast, according to JPMorgan’s Steve Tusa. He cut his price target on GE shares to $11 from $14, the lowest among analysts following the company.

Management’s guidance of around $1 a share in 2018 earnings “is not a credible number, as it does not include restructuring, which will be serial and necessary,” Tusa said Tuesday in a note.

Chief Executive Officer John Flannery, who took the helm in mid-2017, has pledged to reshape the portfolio and cut costs as he tries to pull GE out of one of the worst slumps in its 126-year history. The Boston-based company has faced challenges ranging from cash-flow shortfalls to weak demand for industrial equipment and a probe of its accounting by the U.S. Securities and Exchange Commission.

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Bears Are Back

The JPMorgan report renewed bearish sentiment around the stock after a positive William Blair & Co. note on March 9 said GE’s “downside appears minimal,” sparking a brief rally.

GE fell 3.6 percent at 10:55 a.m. Tuesday in New York after declining as much as 5 percent, the biggest intraday slide in over a month. The shares fell 13 percent this year through Monday, the worst in the Dow Jones Industrial Average.

GE said late Monday that it withheld bonuses for most top executives in 2017 due to the company’s poor performance, the first time it has done that. Still, former CEO Jeffrey Immelt, who left late in the year, earned $8.11 million in total compensation, and Flannery took home $9 million, GE said in a regulatory filing.

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David Joyce, the CEO of GE Aviation, plans to speak Wednesday at a conference hosted by JPMorgan.

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