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While you were sleeping: General Electric slumps

Tuesday 14th November 2017

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Wall Street inched higher as concern about US tax reform plans and a drop in General Electric shares weighed on sentiment at the tail-end of a better-than-expected quarterly earnings season.

In 12.22pm trading in New York, the Dow Jones Industrial Average rose 0.08 percent, while the Nasdaq Composite Index inched 0.07 percent higher. In 12.08pm trading, the Standard & Poor’s 500 Index added 0.09 percent. 

The Dow moved higher as gains in shares of McDonald’s and those of the Home Depot, recently up 1.3 percent and 1.2 percent respectively, outweighed slides in shares of General Electric and those of Travelers Cos, recently down 5.4 percent and 1.2 percent respectively.

GE shares slumped, sending the stock to its lowest level in more than five years, after the company axed its quarterly dividend by 50 percent as part of a plan to revamp its business.

“We understand the importance of this decision to our shareowners and we have not made it lightly,” John Flannery, CEO of GE, said in a statement. “We are focused on driving total shareholder return and believe this is the right decision to align our dividend payout to cash flow generation.” 

"The dividend remains an important component of GE’s capital allocation framework,” Flannery added, “With this action and others … we are acting with urgency to make GE simpler and stronger to drive growth and create more value for our shareowners.”

GE also downgraded its 2018 earnings outlook. 

“By the numbers, we see a core operating performance that is below plan, and, currently, a consensus expectations curve that we think remains too high,” JPMorgan analyst Stephen Tusa told Reuters. 

Investors welcomed the latest results of Tyson Foods as the US meat company reported quarterly profit and sales that exceeded expectations, bolstered by its beef, pork and chicken businesses.

“The fourth quarter was a strong finish to another record year,” Tom Hayes, Tyson Foods’ chief executive officer, said in a statement. “Our Beef and Pork segments delivered outstanding returns for the quarter and for the year, again generating significant cash to fuel investments in our Chicken and Prepared Foods segments." 

“Fiscal 2018 is off to a great start," according to Hayes, adding that the company projects adjusted earnings growth of between 7 and 10 percent to between US$5.70 and US$5.85 per share.

Tyson expects to more than US$200 million in net savings this fiscal year from its so-called Financial Fitness program, including AdvancePierre synergies, Hayes noted.

Shares of Tyson traded 1 percent stronger as of 11.27am in New York.

In Europe, the Stoxx 600 Index ended the day with a 0.7 percent decline from the previous close. Germany’s DAX Index fell 0.4 percent, while France’s CAC 40 Index slid 0.7 percent.

The UK’s FTSE 100 Index dropped 1.6 percent, while the pound also retreated amid concern about UK Prime Minister Theresa May’s ability to negotiate the Brexit deal.

Meanwhile, shares of Anheuser-Busch InBev closed 0.1 percent higher in Brussels after the world's largest brewer said it appointed a new head of its North America business, its key market, to boost sales.

Michel Doukeris has been appointed Zone President North America and CEO of Anheuser-Busch, effective January 1, 2018, the company said in a statement. Doukeris, currently chief sales officer of AB InBev, will succeed João Castro Neves, who decided to step down from the role to pursue other opportunities, the company said.

“The US is our most important market and we recognise the need to continue to focus on driving topline growth across our portfolio,” AB InBev Chief Executive Officer Carlos Brito said in the statement.

(BusinessDesk)

 

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