Breaking News
0

GE Earnings Will Give Turnaround Clues, But Stock Remains Shaky

ca.investing.com/analysis/ge-earnings-will-give-turnaround-clues-but-stock-remains-shaky-200197321
GE Earnings Will Give Turnaround Clues, But Stock Remains Shaky
By Haris Anwer/Investing.com   |  Jul 19, 2018 02:02
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Nobody is expecting an earth-shattering surprise when General Electric (NYSE:GE) releases its quarterly earnings Friday. After a year of carnage in its share price that paved the way for a major business overhaul, all investors want is to see some light at the end of tunnel.

On average, analysts expect that company earned 18 cents a share in the second quarter, down from 28 cents per share in the same quarter a year ago. Revenue is forecast at $29.14 billion.

These low expectations are the outcome of a tumultuous year for this industrial conglomerate. Its stock lost more than half of its value, the dividend was slashed in half and the company was booted from the Dow Jones Industrial Average.

GE Year Chart Weekly View
GE Year Chart Weekly View

But amid this doom and gloom, a picture is emerging about what GE is going to be once Chief Executive Officer John Flannery is done with his turnaround plan. In the company’s strategic review announced late in June, Flannery presented a plan to simplify GE by spinning off its health-care unit, selling down its stake in the Baker Hughes energy business and pulling back further from finance arm GE Capital.

The results will be a tech-focused aviation, power and renewable energy company with a much leaner and simpler structure. Those are “three highly complementary businesses poised for future growth,” Flannery said in a statement.

Can Major Changes Resuscitate The Stock?

But the biggest question investors face is whether this plan will bring GE’s beaten-down stock back to life? Despite all the optimism, we remain skeptical. Investors’ focus will shift to the execution risk of this massive undertaking, with no chance of a V-shaped recovery in its stock price.

Another uncertainty that will keep the company’s share price depressed is its renewed focus on the power business. Unless we see clear evidence of a demand recovery for GE’s power products, its cash flow position will remain weak.

The power unit is going to be the largest revenue generator after GE completes its transformation. Amid weak demand for its steam and gas turbines, orders and prices for fossil fuel equipment have plunged, forcing GE to lay off 12,000 workers at the end of last year.

Investors should expect another drop in sales from the power business when results arrive before the bell Friday. Overall, the Street is expecting a 36% decline in adjusted earnings per share compared to the same period a year ago.

The Bottom Line

Trading around $14, GE shares have been bouncing around levels last seen in 2009.

There is no easy way to value GE, which is in the process of divesting its major businesses and struggling to raise cash to avoid a debt rating cut. As we have written in our earlier articles, it’s better for risk-averse investors to stay on the sidelines.

Flannery is focusing on all the right businesses, where future growth is. But interested investors will need to be patient.

GE Earnings Will Give Turnaround Clues, But Stock Remains Shaky
 

Related Articles

GE Earnings Will Give Turnaround Clues, But Stock Remains Shaky

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email