No respite for GE as analyst warns of tax troubles threat

÷ IT’S been one thing after another at General Electric and the spiral of gloom is showing no signs of abating. Shares have suffered the longest losing streak in a year, despite a turnaround plan announced by the much-respected new chief executive, Larry Culp (pictured) last week.

A credit rating downgrade by Moody’s and a patent challenge from Toyota have weighed on sentiment. And Gordon Haskett analyst John Inch now warns GE’s near-term tax liabilities could rise significantly, possibly by billions of dollars more.

“While GE took an equity capital raise off the table, we believe ongoing cash and liability pressures, including the prospects of rising taxes, may result in a future change to this decision,” Inch wrote in a note. GE might have owed up to $9bn in taxes as per the Tax Cuts and Jobs Act, surmising from GE’s previous large un-repatriated foreign earnings balance, but it took only $3.3bn in charges, citing various “offsets,” he said. “If even some of these ‘offsets’ are disallowed, it could wind up owing a large tax bill near term coming at a difficult time for GE given its deteriorating cash flow, declining Power fundamentals and rising GE Capital funding costs as the company is forced out of the commercial paper market,” Inch added.