Stocks: GE Stock Tumbles on Analyst Cut -- WSJ
November 10 2018 - 03:02AM
Dow Jones News
By Corrie Driebusch
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (November 10, 2018).
General Electric Co.'s woes are worsening.
The industrial conglomerate's shares tumbled again Friday after
analysts at JPMorgan Chase & Co. sharply cut their price target
on the stock, underscoring the deepening questions on Wall Street
about the true worth of a company that just two decades ago was the
most-valuable U.S. stock.
Shares declined 5.7% to $8.58, extending their losses for the
year to more than 50%.
The analysts, who cut their price target to $6 a share, shared a
few reasons for their dimmed view of the stock: GE's high leverage
and little cash on hand, its disappointing third-quarter results
and its slashed dividend. That target is 90% below the company's
all-time high of $60, reached in August 2000, and below its
financial-crisis trough of $6.66 a share on March 5, 2009.
The lower target, which JPMorgan called generous under the
circumstances, is the latest blow to the company, which was an
original member of the Dow Jones Industrial Average and earned the
distinction of being the most valuable company in America in the
early 2000s. GE lost its coveted spot in the 30-stock Dow Jones
Industrial Average in June.
"GE is a fundamentally strong company with a sound liquidity
position," a spokeswoman for the company said.
The shares suffered their worst one-day performance since Oct.
30. Shares fell 8.8% that day after the conglomerate cut its
dividend to a token one penny a share -- and revealed
simultaneously that federal prosecutors had opened a criminal
accounting probe into the company's practices.
The JPMorgan analysts said GE's $100 billion in liabilities and
nonexistent enterprise free cash flow are particularly concerning.
Though the stock's recent pullback -- it is down a quarter since
the start of October -- may seem like capitulation, JPMorgan isn't
so optimistic. The company's run rate, or its expected financial
performance based on current financial information, will be zero in
six of GE's eight business segments by 2020, according to
JPMorgan's analysis. All eight business segments were profitable
two years ago, the analysts' note adds.
Operational and financial struggles have led investors to sell
GE's stock, even as the company has worked to transform itself. It
named its second new CEO in less than 15 months and unveiled major
portfolio changes, including billions in divestitures and plans to
spin off its health-care division and reduce its stake in oil-field
services provider Baker Hughes, among other changes, the analysts
acknowledged. It also has said it remains focused on shrinking and
deleveraging GE Capital, its financial-services arm. And one bright
spot for the company is its aviation business, whose engines are
still in demand from airplane makers like Boeing Co.
Still, analysts pointed to worries about poor earnings,
structural concerns in key power markets and what they called an
expensive stock price based on free cash flow. Going forward, the
likelihood of improvement is uncertain, the analysts said.
Write to Corrie Driebusch at corrie.driebusch@wsj.com
(END) Dow Jones Newswires
November 10, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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