GE shares fall after Moody’s puts credit rating under review for possible downgrade

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A worker cleans a part of a gas turbine on the assembly line at the General Electric energy plant in Greenville, South Carolina.

General Electric’s credit rating is under review for a possible downgrade at Moody’s, the ratings agency said Tuesday.

Specifically, the rating under review is the company’s A2 rating. GE Capital’s P-1 rating is also under review.

Moody’s said the review was prompted by GE’s announcement that it will fall short of its earnings and free cash flow guidance for 2018 amid weak performance from its power business.

“Among the range of issues that Moody’s will consider is the impact on GE’s earnings and cash flow prospects of the continuing deterioration in its Power business, which is likely to persist for some time,” Moody’s said in a release. “The dimmer prospects for GE Power take on heightened importance given the loss of free cash flow from GE’s planned divestitures, including the highly cash generative GE Transportation and GE Healthcare.”

Moody’s added it will consider the options available to GE to “alleviate the ensuing pressure from the diminished cash flows,” as well as how to improve its free cash flow relative to its debt balance.

GE shares gave up initial gains to trade 2 percent lower after Moody’s announcement.

The company said Monday it would take a $23 billion charge for its struggling power business. GE also announced the abrupt removal of CEO John Flannery, who was replaced by former Danaher CEO Lawrence Culp.