Pair of analysts offer warnings about troubled GE
A pair of General Electric Co.’s most prominent critics are reminding investors that solving all the company’s problems won’t be as simple as appointing a new CEO.
The downtrodden manufacturer is weighed down by a deteriorating finance business and doesn’t have enough assets or cash flow to pay down its liabilities, according to Steve Tusa, a JPMorgan Chase & Co. analyst and longtime GE bear. The comments came in a note Friday as another analyst, Gordon Haskett’s John Inch, initiated GE coverage by telling investors to sell the shares.
The opinions throw cold water on a brief rally this month after GE named Larry Culp, a respected industrial executive, to replace CEO John Flannery. The shake-up was designed to accelerate efforts to reverse one of the deepest slides in GE’s 126-year history.
GE fell 0.4 percent to $12.66 a share at 11:06 a.m. in New York. The shares had fallen 27 percent this year through Thursday, despite gaining 13 percent since Culp was named CEO on Oct. 1.
The turbulence was underscored Friday when GE said it would delay its thirdquarter earnings report by five days to Oct. 30 to give Culp more time to assess the company. After wrapping up site visits, he’ll share “initial observations” in the upcoming earnings call and give a more detailed breakdown early next year, GE said in a statement.
GE is facing a range of problems, including a slumping market for power equipment, investigations by the Securities and Exchange Commission and severe cash flow challenges. The issues are exacerbated by a recent credit rating downgrade that adds to GE’s cost of capital, Tusa said. The difficulty of fixing the balance sheet, he said, is “among the most challenging company-specific issues we have ever seen.”
Inch, who previously followed GE as an analyst with Deutsche Bank, started coverage at Gordon Haskett with an “underperform” rating and a price target of $11 a share. The challenges facing the company may take years to work out, he said.