General Electric Co officials will meet with investors to take a unenviable task of trying to convince Wall Street there is no "time bomb" to fear in GE.
Concerns over how well the U.S. conglomerate's hefty finance business is reserved against an expected rise in defaults. loans has pounded GE shares, which are down 71 percent just since the start of the year.
Among investors' top concerns are whether GE will lower its $5 billion profit target for GE Capital, which many analysts regard as overly optimistic, and what level of defaults the company expects in its consumer lending businesses, mortgages and a U.S. private-label credit-card business.
Officials with the Fairfield, Connecticut-based company have acknowledged that GE expects very high write-offs from its financial portfolio this year, as a deepening recession makes it tougher for consumers and businesses to repay their loans.
But they have also tried to persuade investors that, in the words of Chief Financial Officer Keith Sherin, there is no "time bomb" hidden in its books.
"The biggest job we have right now is convincing investors that there is no black box," Chief Executive Jeff Immelt said in a Monday interview with the ArabianBusiness.com website.
It will fall to Sherin and GE Capital CEO Mike Neal to prove that case to Wall Street on Thursday. They plan to disclose the result of GE's recent "stress test" of its financial portfolio in a meeting in New York beginning at 9 a.m. EDT, said spokesman Russell Wilkerson.
GE ballooned to represent 50 percent of the conglomerate's profit in 2007, before the downturn. Immelt has said he wants to bring that down to 30 percent.
"I want to hear the progression of the portfolio. Is it still on trajectory in terms of what they've planned for right-sizing it?" said Peter Sorrentino, senior vice president and portfolio manager at Huntington Asset Advisors in Cincinnati, which owns GE shares.
That progress will be important, Sorrentino said, since the pace of restructuring will influence whether GE will need to shift more money from its industrial businesses to the finance arm this year. Last month the company moved $9.5 billion into the finance arm to reduce its debt leverage ratio.