Shares of General Electric dropped to a nine-year low, putting the hurt on exchange-traded funds (ETFs) with the largest holdings of GE, such as Davis Select US Equity ETF (NasdaqGM: DUSA), Oppenheimer S&P Ultra Dividend Rev ETF (NYSEArca: RDIV) and Industrial Select Sector SPDR ETF (NYSEArca: XLI). GE shares were down 4% as of 1:15 p.m. ET as the company is working feverishly to fix a gas turbine failure in Texas.
The turbine issue was purportedly discovered by one of its customers, energy company Exelon, citing an “oxidation issue” with the turbine’s fan blades at two plants located in Texas. As a result of the issue, the operation life of the turbines were compromised, forcing a shutdown of the plants, which apparently is not the first time this occurrence has taken place.
“A few weeks ago, there was an event at Exelon’s Colorado Bend site that resulted from an issue with an HA turbine component,” GE Power spokesman Chris Shigas said. “We expect the same issue to impact other HA units. We have identified the solution and have a plan in place, and we have been proactively working with customers on a case-by-case basis to address any impacted unit. We expect the Exelon unit to return to service soon.”
GE shares were further depressed by investment firm J.P. Morgan effectively lowering its GE price target to $10 per share versus its initial $11 per share last week as a result of the turbine failures, citing the incident as “a negative development for a company that has little wiggle room.”