S&P Global Ratings downgraded General Electric's credit rating on Tuesday, a day after the company announced the firing of its CEO and that it would take a $23 billion charge because of its power business.
The ratings agency lowered its GE rating to BBB+ from A. However, S&P hiked its outlook on the company to stable from negative.
"The timing and magnitude of such actions compared to our previous expectations could take longer as [the incoming CEO] undertakes his own evaluation," S&P said in a release. "The latest news on power performance has led us revise down our view of GE's aggregate competitive positioning, with solid performance in aviation and health care further overshadowed by weakness in the power segment."
GE said Monday that 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.
Earlier on Tuesday, Moody's placed GE's credit rating under review for a possible downgrade. Specifically, the company's A2 rating is under review at Moody's. GE Capital's P-1 rating is also under review.
Moody's said the review was prompted by GE's announcement Monday 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 fell as much as 2.6 percent before closing 1.9 percent higher.
In a statement Tuesday after the announcement by Moody's, GE said it "has a sound liquidity position, including cash and operating credit lines. We remain committed to strengthening the balance sheet including deleveraging."
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