Why Shares of General Electric Slumped in June
Shares of industrial giant General Electric (NYSE: GE) declined by 18.7% in June, according to data provided by S&P Global Market Intelligence. While the overall market was weak in June, GE's underperformance speaks to the market's fears over the industrial company's prospects in 2022. There are two interrelated issues to consider.
First, in the first-quarter earnings call, management said GE was trending toward the low end of its full-year guidance due to supply chain pressures in its aviation, healthcare, and renewable energy segments. On a brighter note, the power segment is firmly in turnaround mode. Given that many companies are reporting worse-than-expected supply chain problems, it's reasonable to expect more pressure on GE in the second quarter. Simply put, GE's full-year guidance could be under threat.
Second, if GE is going to lower its earnings expectations in 2022, it calls into question the smooth flow of the breakup plan. As a reminder, GE plans to spin off GE Healthcare in early 2023 and then spin off a combination of GE Power and GE Renewable Energy in early 2024. So if GE and GE Healthcare's earnings are under threat in 2022, then it might affect the level of debt GE Healthcare will be spun off with -- companies are typically loaded with debt in line with their earnings.
Source Fool.com
