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GENERAL ELECTRIC COMPANY

(GE)
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GE shares tumble as J.P. Morgan analyst downgrades, cuts PT further

04/08/2019 | 11:38am EDT
FILE PHOTO: The logo of US conglomerate General Electric is pictured at the company's site of its energy branch in Belfort

(Reuters) - Shares of General Electric Co fell more than 7 percent on Monday after J.P. Morgan's Stephen Tusa, a top-rated analyst, downgraded the stock and further cut his price target to a Street-low of $5.

Tusa, a long-time bear on the stock, cited significant liabilities and little free cash flow to support the company's ongoing reset and cut his rating to "underweight" from "neutral", an about-turn from an upgrade in December.

"Investors are underestimating severity of challenges and underlying risks at GE and overestimating value of small positives," Tusa wrote in a note.

Tusa said investors are "significantly over projecting" the bounce in free cash flow and sees weakness in the company's power and renewables unit.

Listing the challenges faced by the industrial conglomerate, Tusa said GE Capital Services unit is likely to consume cash for the foreseeable future, with aviation fundamentals weaker than what meets the eye.

GE could lose as much as $2 billion (1.53 billion pounds) in cash from its industrial businesses in 2019, Chief Executive Officer Larry Culp said in March, setting conservative profit targets for the year.

He called 2019 a "reset year" and said though there was short-term pain for the company, free cash flow at GE Power would turn positive in 2021.

Culp has an uphill task of placating investors who have dumped the stock as the company racked up staggering losses of more than $30 billion over the last two years and cut its dividend to near zero.

Analysts at research firm Gordon Haskett expect the company to report a negative cash flow of $2.4 billion to $2.5 billion for the first quarter.

"This time around, we find it extraordinary that some analysts are suggesting that a potential GE free cash flow loss of up to $4 billion this Q (vs a loss of $1.7 bln in 1Q18) would be 'fair' or 'expected'," analyst John Inch at Gordon Haskett said.

"We believe that magnitude of cash loss could be both highly problematic and poorly received by the bond market and debt ratings agencies."

GE will report its quarterly results on April 30.

The company's shares were down at $9.30 in mid-day trading.

(Reporting by Rachit Vats in Bengaluru; Editing by Sriraj Kalluvila)


ę Reuters 2019
Stocks mentioned in the article
ChangeLast1st jan.
CULP, INC. 0.30% 13.23 Delayed Quote.-16.64%
DEERE & COMPANY -0.65% 340.71 Delayed Quote.26.63%
GENERAL ELECTRIC COMPANY 0.87% 104.05 Delayed Quote.20.43%
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Analyst Recommendations on GENERAL ELECTRIC COMPANY
More recommendations
Financials (USD)
Sales 2021 76 434 M - -
Net income 2021 1 102 M - -
Net Debt 2021 13 076 M - -
P/E ratio 2021 509x
Yield 2021 0,31%
Capitalization 114 B 114 B -
EV / Sales 2021 1,67x
EV / Sales 2022 1,58x
Nbr of Employees 174 000
Free-Float 74,1%
Chart GENERAL ELECTRIC COMPANY
Duration : Period :
General Electric Company Technical Analysis Chart | GE | US3696043013 | MarketScreener
Technical analysis trends GENERAL ELECTRIC COMPANY
Short TermMid-TermLong Term
TrendsBullishNeutralBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 20
Last Close Price 104,05 $
Average target price 116,51 $
Spread / Average Target 12,0%
EPS Revisions
Managers and Directors
H. Lawrence Culp Chairman & Chief Executive Officer
Carolina Dybeck-Happe Chief Financial Officer & Senior Vice President
Victor Abate Chief Technology Officer & Senior Vice President
Nancy Anderson Chief Information Officer & Vice President
James S. Tisch Independent Director
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