U.S. Markets closed

General Electric to Lay Off Employees, Aims Cost Reduction

Zacks Equity Research
1 / 3

Should You Buy Scientific Games (SGMS) Ahead of Earnings?

Scientific Games (SGMS) is seeing favorable earnings estimate revision activity as of late, which is generally a precursor to an earnings beat.

General Electric Company GE yesterday announced that will lay off as many as 1,200 jobs in Switzerland, all related to its power generation business. Notably, this plan is a part of the company’s cost-reduction initiatives announced in 2017.

In this context, it is worth mentioning that 1,200 job cuts in Switzerland are comparatively lower than originally decided 1,400. The latest retrenchment will likely impact roughly 230 employees in Birr, 920 in Baden and 50 in Oberentfelden.

General Electric’s Cost Reduction Plan

GE Power — a General Electric company, headquartered in Schenectady, NY — announced its costs-reduction plan in December 2017. It communicated its plan to lower global workforce by 12,000.

This move along with other initiatives taken during 2017 is expected to help GE Power in achieving its $1 billion target of structural costs reduction in 2018. Additionally, these initiatives will strengthen GE Power’s ability to tide over issues in the global power market as well as enhance its competitiveness compared with other global players in the same space. Operational excellence, enhanced cash flows, improved margins and increased shareholders’ value are other anticipated outcomes.

General Electric’s Power segment engages in the production of gas, steam and aero derivative turbines as well as generators and combined cycle systems. In the first quarter of 2018, this segment contributed roughly 26.4% to the company’s Industrial revenues. Structural cost reduction in the quarter was $354 million while it totaled approximately $0.8 billion in 2017. In the last six months ended March 2018, the segment closed as many as 17 sites.

For the entire Industrial business, reduction in structural costs (driven by Power, Oil & Gas and Corporate) was roughly $0.8 billion in the first quarter of 2018. Markedly, these efforts are part of GE Electric’s plan to lower its structural costs in 2017 and 2018 by $3.5 billion.

Zacks Rank & Key Picks

With a market capitalization of nearly $114.6 billion, General Electric currently carries a Zacks Rank #3 (Hold). The company’s Zacks Consensus Estimate is pegged at 95 cents per share for 2018 and $1.01 for 2019, reflecting decline of 1% and growth of 1% from the respective 60-day-ago tallies.

General Electric Company Price and Consensus
 

General Electric Company Price and Consensus | General Electric Company Quote
 

Year to date, General Electric’s shares have declined 24.4% compared with the industry's 8.7% fall.


 

Some better-ranked stocks in the industry are Crane Company CR, Federal Signal Corporation FSS and Honeywell International Inc. HON. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the last 60 days, earnings estimates for these three stocks improved both for the current year and the next year. Also, average earnings surprise for the trailing four quarters was a positive 2.13% for Crane, 16.07% for Federal Signal and 1.49% for Honeywell International.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Honeywell International Inc. (HON) : Free Stock Analysis Report
 
General Electric Company (GE) : Free Stock Analysis Report
 
Federal Signal Corporation (FSS) : Free Stock Analysis Report
 
Crane Company (CR) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research