Industrials

Tara Lachapelle is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

When your company is one of the only stocks weighing down the Dow Jones Industrial Average -- with a $68 billion loss of market value this year -- it's time to clean house. Why procrastinate? 

General Electric Co. bookended last week with news of a leadership shakeup. First, it said Jeffrey Immelt was retiring as chairman about three months ahead of schedule (he had already turned over his CEO duties to John Flannery in August). That news was followed by an announcement late Friday that CFO Jeffrey Bornstein is also leaving, as are two vice chairs, Beth Comstock and John Rice.

Time for a Change
Now that Jeff Immelt has handed over the keys, all eyes are on John Flannery now to turn around GE's stock
Source: Bloomberg

Jamie Miller, the head of GE's locomotive business, will step into Bornstein's role, creating more of a clean slate at the top for Flannery. The new CEO is tasked with trying to turn around an iconic company whose lagging performance has lured the attention of activist investor Nelson Peltz's Trian Fund Management LP. 

Keeping Score
While benchmark indexes are closing out their best year since 2013, GE's shares have tumbled 23%, leaving them cheap relative to historic levels and peers:
Source: Bloomberg
Note: Forward price-earnings based on analysts' estimates for the next 12 months

GE has become the definition of a conglomerate discount. Its forward price-earnings ratio of about 15 as of Friday's close is lower than 71 percent of the S&P 500. Flannery is tasked with wringing out $2 billion of costs by the end of next year. 

Uphill Battle
GE has a long ways to go to meet its 2017 cash flow targets.
Source: Company reports, Bloomberg
Note: Excludes deal taxes and pension

Also, apparently GE has a thing for J names, but kudos for elevating a woman (Miller) to the C-Suite. She ran one of GE's most profitable businesses, even if it was a small contributor to overall revenue. Let's see what this leadership refresh can do. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tara Lachapelle in New York at tlachapelle@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net