An­a­lyst: GE shares still don’t suf­fi­ciently re­flect facts

The Atlanta Journal-Constitution - - BUSINESS - By Esha Dey and Joshua Fine­man Bloomberg News

Gen­eral Elec­tric plunged to­ward its re­ces­sion-era low as the com­pany’s most bear­ish an­a­lyst said the plum­met­ing stock price is poised to fall fur­ther.

JPMor­gan Chase an­a­lyst Steve Tusa slashed his price tar­get to $6, the low­est on Wall Street, cit­ing ris­ing li­a­bil­i­ties, a weak­en­ing cash-flow out­look and poor third-quar­ter re­sults on “al­most all fronts.” He also pointed to de­te­ri­o­rat­ing re­sults at GE’s trou­bled power di­vi­sion and fi­nan­cial busi­ness.

“While the stock is down about 70 per­cent from the peak of $30, this move still does not suf­fi­ciently re­flect the fun­da­men­tal facts,” Tusa said in a note to clients.

The pes­simistic view from Tusa, who has been pre­scient in pre­dict­ing GE’s col­lapse in re­cent years, fu­eled a share de­cline that has wiped out $200 bil­lion in mar­ket value since the end of 2016. GE is grap­pling with one of the deep­est slumps in its 126-year his­tory amid weak de­mand for gas tur­bines, plus fed­eral ac­count­ing in­ves­ti­ga­tions and heavy debt.

The shares closed down 5.7 per­cent Fri­day to $8.58 after declining to as lit­tle as $8.15, the low­est in­tra­day price since March 2009.

That was the same month GE fell to $6.66, the stock’s nadir dur­ing the global fi­nan­cial cri­sis.

The Bos­ton-based man­u­fac­turer said it was tak­ing steps to shore up its busi­ness. GE has been stream­lin­ing its port­fo­lio to fo­cus on power equip­ment, jet en­gines and re­new­able en­ergy.

“GE is a fun­da­men­tally strong com­pany with a sound liq­uid­ity po­si­tion,” the com­pany said by email. “We are tak­ing ag­gres­sive ac­tion to strengthen our balance sheet through ac­cel­er­ated delever­ag­ing and po­si­tion our busi­nesses for suc­cess.”

The com­pany an­nounced the sur­prise ap­point­ment of Larry

Culp as chief ex­ec­u­tive offi- cer last month, re­plac­ing John Flan­nery. Culp must still face up to a weak­ened out­look for earn­ings per share, Tusa said.

“We are skep­ti­cal around calls for a bot­tom un­til man- age­ment re­sets EPS ex­pecta- tions that are closer to free cash flow, some­thing we be­lieve they haven’t done for al­most 20 years,” he said.

GE’s third-quar­ter re­sults, re­ported last week, missed an­a­lysts’ es­ti­mates, while the com­pany also slashed its div­i­dend and re­vealed an ex­panded fed­eral probe into its ac­count­ing.

Tusa’s con­cerns were echoed by Bloomberg In­tel­li­gence an­a­lyst Joel Lev­ing­ton, who said the com­pany’s reg­u­la­tory fil­ings con­tained com­ments about “on- and off-balance-sheet li­a­bil­i­ties, con­tin­gen­cies, law­suits and liq­uid­ity items, which, taken to­gether, re­in­force our con­cerns about GE’s credit risk.”

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