Shares of General Electric (GE) dropped sharply in morning trading after a company executive confirmed an issue with a line of turbines, prompting a JPMorgan analyst to lower his price target on shares.

TURBINE PROBLEM: GE Power Chief Executive Officer Russell Stokes said in a blog post on LinkedIn that the company recently identified an "oxidation issue" that impacts the lifespan of blades in its HA-Class turbines. "Obviously, this was a frustrating development, for us, as well as for our customers", Stokes said, adding that the company has identified a fix and has been working proactively with HA operators to address impacted turbines. He also added that the "minor adjustments" the company is making "do not make the HA any less of a record-setting turbine", as "they are meeting -- and in many cases exceeding -- their performance goals at every customer site today". 

ANOTHER 'SHOE DROPS': JPMorgan analyst Stephen Tusa kept an Underweight rating on GE and cut his price target to $10 from $11, telling investors in a research note that the impact on "asset value" from a failure at GE's U.S. H-frame launch customer, while tough to estimate, represents a negative development for a company that has little wiggle room for more "shoes to drop." The analyst's channel checks suggest GE has experienced a failure in a first stage blade on an H-frame in one of its two initial marquee installations in the U.S., Colorado Bend, and said GE is "minimizing" the issue by referring to the problem in general as an "oxidation issue". Tusa said he believes the situation is worse than what GE said, as the problem is material enough for Exelon (EXC) to have shut the Texas plant down, along with the "award-winning" Wolf Hollow plant for precautionary measures. If the situation is as bad as it seems, there should no longer be any doubt that GE Power has company-specific issues, Tusa continued, adding that he is now assuming weaker results at power with some franchise value impact.

PRICE ACTION: In morning trading, shares of GE are down 3.3% to $12.44.