General Electric (GE) warned of more job cuts in its flagship aviation business, despite favorable news on Boeing (BA) and coronavirus vaccines. But GE stock rose amid a broad market rally and an analyst upgrade.
Business conditions remain difficult and GE Aviation would have to shrink over the next 18 months, the Wall Street Journal reported, citing an internal video message delivered a week before Thanksgiving.
Two earlier rounds of layoffs this year sliced 25% of GE Aviation’s 52,000 employees around the world. The unit’s new chief, John Slattery, promised more focused job cuts this time around. But he didn’t disclose the number of jobs to be cut.
Slattery, formerly of Embraer (ERJ), also warned business revenue and profit forecasts for this year and the next are “fundamentally lower” than prior expectations.
He added GE’s commercial aviation business would be “smaller” and that “the promise of the vaccine certainly brings hope but it’s not coming as fast as we’d like.”
A spokeswoman told the Journal that GE will scale its business to “match the realities of the global airline industry recovery.” GE CEO Larry Culp previously has warned of a long recovery from the pandemic collapse in global commercial air travel.
Additional GE layoffs come as Moderna (MRNA), AstraZeneca (AZN) and Pfizer (PFE)-BioNTech (BNTX) report progress on separate vaccines. But widespread vaccinations aren’t expected until spring or summer of 2021.
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Shares closed well off session highs, finishing 3.8% higher at 10.45 in Tuesday stock market trading. Earlier in November, GE stock cleared an 8.67 buy point in a cup base within a longer consolidation, according to MarketSmith chart analysis. Shares are no longer in a buy range. The relative strength line for GE stock is rising within a multiyear downtrend. Jet engine rival Raytheon Technologies (RTX) gained 2.4%.
GE stock got a further boost Tuesday when Oppenheimer upgraded shares to outperform from perform.
“Operationally, GE has clearly set a positive direction with broadening momentum, on diligent and better-focused restructuring and cultural decentralization/accountability taking hold,” said analyst Chris Glynn, who gave GE stock a price target of 12.
Meanwhile, the Boeing 737 Max has received U.S. approval to reenter service following two fatal flights, one each in 2018 and 2019, and certifications from other international regulators should soon follow. But airlines expect that getting the planes back in the air will take several weeks longer.
GE Aviation makes Max engines in a joint venture with France’s Safran.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
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