Reports Q2 2019 results on Wednesday, July 31, before the market opens
Income expectation: $ 28.48 billion
Investors do not expect a big surprise tomorrow from the controversial industrial conglomerate General Electric Co. (NYSE 🙂 when it announces its second quarter.
After unraveling the past two years, bottom-line profitability has taken a back seat. Investors are most concerned about GE's cash position and the update of the turnaround efforts.
According to the latest guidelines, GE can burn between $ 1 billion and $ 2 billion in cash in the second quarter as a creator of light bulbs, power turbines and aircraft engines undergoing a major restructuring to survive in an environment in demand its flagship products have declined and debt has increased.
To preserve money, the once venerable giant nearly eliminated his legendary rock solid dividend last year, winning Larry Culp as CEO and launching a massive asset sales program.
To preserve cash, the once venerable giant nearly eliminated his legendary rock-solid dividend last year; Larry Culp brought in as CEO; and started a massive program for asset sales.
To preserve cash, the once venerable giant nearly eliminated his legendary rock-solid dividend last year; Larry Culp brought in as CEO; and started a massive program for asset sales.
To preserve cash, the once venerable giant nearly eliminated his legendary rock-solid dividend last year; Larry Culp brought in as CEO; and started a massive program for asset sales.
General electrical price chart
The stock performance so far suggests that there is still a long way to go before Culp can restore investor confidence. Since October last year, when Culp took over as CEO – after the initial enthusiasm that the shares pushed more than 20% higher, they have now fallen about 4% since the date of his appointment, trading at $ 10.38 at the end From yesterday.
Since October last year, when Culp took over as CEO – after the initial enthusiasm that the shares pushed more than 20% higher, they have now fallen about 4% since the date of his appointment, acting at $ 10.38 at the end of yesterday.
Since October last year, when Culp took over as CEO – after the initial enthusiasm that the shares pushed more than 20% higher, they have now fallen about 4% since the date of his appointment, acting at $ 10.38 at the end of yesterday.
Since October last year, when Culp took over as CEO – after the initial enthusiasm that the shares pushed more than 20% higher, they have now fallen about 4% since the date of his appointment, acting at $ 10.38 at the end of yesterday.
they have now fallen about 4% since the date of his appointment, trading at $ 10.38 at the end of yesterday.
Bleeding Power Unit
The biggest challenge for Culp is to repair GE & # 39; s Power division, which bleeds millions of dollars in cash every day. GE Power lost more than $ 800 million last year. With a turnover of $ 27 billion, it is one of GE's largest companies, but investors rate it at zero – or worse. This means there is an ongoing investigation by the Securities and Exchange Commission into the accounting practices of the company.
Very few analysts on the street have changed their pessimistic view of GE shares and one of them is Stephen Tusa from JPMorgan, who was the most accurate predictor when it comes to GE.
In a letter to customers last week, he advised investors to stay away from GE, even if the company exceeds expectations for the second quarter. He said GE & # 39; is ready to beat the Wall Street consensus & # 39; about the industrial free cash flows of the company, but that could lead to a simultaneous reduction of the company's future forecast. Tusa said:
"We see the same dynamic here where despite a 4Q18" beat "on free cash flows, the forward FCF estimate has been lowered by about 30%."
For Tusa, GE & # 39; s cash projections are not & # 39; t realistic especially because its financial services division continues to thrive cash, while the industrial giant does not take into account the possibility of a recession, which requires more asset sales than the market expects.
Bottom Line
The restructuring of GE is still a work-in-progress with little evidence of a turnaround. This means that the stock will continue to trade at almost the lowest level. But for high-risk buyers this might be a good time to take a position. Before we do that, however, investors must firmly believe in Culp's leadership. We are currently maintaining our neutral position on this share.
