General Electric Co
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 7 percent to close at $12.09 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 <.spx>.
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 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
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 Oct. 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.SHADOW OF ITS FORMER SELF
GE`s board was unhappy with the pace of the company`s turnaround under Flannery, and when the size of the writedown in the power plant division, which makes electric generating equipment, became apparent, the board was persuaded to seek a new CEO, according to a person familiar with the matter who requested anonymity to discuss confidential deliberations.
However, GE will not be changing its announced breakup plan, which calls for spinning off healthcare and shedding its stake in oil services company Baker Hughes
Culp indicated that he will tackle the company`s problems aggressively. "We will move with urgency. ... We have a lot of work ahead of us to unlock the value of GE," he said in a statement.
The troubles in the power plant unit have been intensifying, as Reuters reported in July, with the news that one of its most valuable clients, Saudi Arabia, was lining up competitors to bid against GE for lucrative power plant work.
GE doubled down on fossil fuels in 2015 under Immelt with the $10.3 billion purchase of French group Alstom SA`s
"The board is signaling to the market that we are not going to give anyone free reign like we did with Jeff Immelt," said Morningstar analyst Joshua Aguilar.
The power division`s outlook appeared to worsen last month when GE said several power plants equipped with its newest turbines had to be shut down because of a part failure.
Changing CEOs "won`t fix short-term problems at power, but Larry, as an outsider, will be able to make the difficult decisions on cost," said Scott Davis, an analyst at Melius Research in New York. "GE is bloated and its culture is destroyed."
Davis said the stock price has probably already adjusted to expectations of no contribution from power.
A slimmed down General Electric - a 126-year-old conglomerate that was once the most valuable U.S. corporation and a global symbol of American business power -- will focus on jet engines, power plants and renewable energy.
In June, GE lost its spot in the blue-chip Dow Jones Industrial Average <.dji> after over a century.
"Investors grew impatient with the lack of improvement and with the sheer scale of the problems uncovered. However, these problems were not created under [Flannery`s] tenure," CFRA analyst Jim Corridore said in a note. "The market seems to be welcoming a change in leadership but the new CEO will be facing many of the same problems."
GE said the power division`s goodwill balance is about $23 billion and the impairment charge would eliminate most of it. The non-cash charge primarily relates to GE`s acquisition of power assets from Alstom in 2015, GE said.
GE`s long stock slide means the once-largest U.S. industrial company is now only sixth in terms of market capitalization, behind Boeing Co
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