The day that General Electric Co. GE announced John Flannery would be its next CEO, he promised investors that the digital manufacturer's best days still lay ahead.
This week, the 55-year-old who succeeded Jeffrey Immelt in the top job on Aug. 1, put his own money behind that optimism, buying another $2.66 million of GE's stock that increased his stake to $15.6 million, according to a regulatory filing. Immelt, 61, owned shares worth $66 million as of mid-May.
"I'm excited about our future," the new CEO told employees in a memo obtained by TheStreet that highlighted the company's capabilities in products from jet engines to power plants and medical equipment. "The purpose of GE -- to move, build, power, cure the world -- is clear and meaningful, and people inside and outside the company understand it. "
Flannery is taking over at a turning point for the company founded as a light-bulb maker by Thomas Edison. His predecessor, whose tenure included challenges from the 9/11 attacks to the 2008 financial crisis, streamlined GE to focus on its industrial roots but struggled to drive up the stock price and, recently, to deliver the profits investors demanded.
While GE is the world's 14th-largest company, according to Forbes magazine, its shares have dropped 19% over the past 12 months to $25.27 as oil-equipment sales were curbed by lower crude prices and a protracted government debate over possible cuts to former President Barack Obama's signature insurance program slowed purchases of health-care equipment.
During the month between the announcement of his promotion and moving into the post, Flannery met with 100 investors who outlined their expectations of better cash usage, higher margins and cost reduction, he wrote in the memo.
Investors grasp "how massive the portfolio transformation has been since 2001" -- including exiting broadcast television, appliances and most of lending -- but want an intense focus on running the company well and more accountability, Flannery wrote. "I heard them loud and clear."
Indeed, Immelt was already grappling before he announced his retirement with pressure from activist investor Nelson Peltz's Trian Partners to boost earnings to as much as $2.33 a share in 2018. That was an even more ambitious target than the company's earlier $2 goal, which Immelt had warned might be tough to reach.
Still, "we increasingly sense GE has passed through the eye of the shareholder-disappoint hurricane that it has been caught in since July 2016," when the Boston-based conglomerated reported the first of a series of weaker-than-expected operating-cash numbers, Nick Heymann, an analyst with William Blair, said in a note to clients in late July.
Flannery has said he will outline a strategy for addressing such concerns in November and has assured investors in the meantime that the company's dividend won't be cut.
If the new CEO is able to restore shareholder confidence that the company "can increase its sustainable cash from operating activities by 50% or more by late this decade, we believe confidence in GE's ability to grow its annual dividend will significantly return," Heymann wrote.
GE reported profit of $1.49 a share last year from industrial businesses and lending operations that it plans to keep, and is working to deliver as much as $1.70 this year.
Earnings may, however, be as low as $1.55, the estimate from Jeff Sprague of Vertical Research, who noted that resetting this year's target would lower the baseline from which Flannery has to build next year.
As for cash from manufacturing, GE has its work cut out for it.
Despite improving by $3.1 billion in the three months through June, the manufacturer remained $200 million in the red on that measure for the first half of 2017.