Is General Electric $GE Stock a Buy?
In-depth analysis to assist you with your investment decision.
Stock Ticker –
Stock Name and Stock Trading Stock Exchange Platform –
General Electric Company GE – New York Stock Exchange NYSE
The Stock Sector –
$GE is a global industrials conglomerate tracing its inception back to 1882. It came about through a merging of two companies linked to renowned American inventor Thomas Edison.
Traditionally GE focused on power generation and related electrical appliance tools. It has seen an evolution over the years.
GE is involved in:-
- Aircraft engines,
- electric distribution,
- and more recently, it has announced a stock split that will enable it to enter into healthcare, renewables, and aviation.
GE is a mega-corporation and ranked as a top fortune 50 company. It was the largest company in the world in 2000.
GE is very well-rounded and has an interest in almost every major industry directly and indirectly.
Recent News on GE
GE is depicted as a falling giant, having experienced the most epic historical events.
It had been struggling in recent years and this is evidenced by GE’s recent earnings report. The earnings were released in February 2022. And the report missed the expectations of analysts.
GE Share Price
The share price tanked following the announcements, and they have cited,
- supply chain constraints,
- inflation, and
- omicron fears among others that caused the decline. The price has recovered in the last week and is fairly up.
The company’s stock had split into three new divisions, as witnessed a few months ago. This change occurred in an attempt to boost its activities.
GE Renewable Energy has won a wind turbine contract, and this is a good achievement as renewables are expected to take off.
GE has terminated operations in Russia, due to geopolitical tensions, and has expressed uncertainty fears over the situation.
Although Russia only accounts for 2% of GE’S overall sales, the ripple effect will likely roll over into the market.
The board of stakeholders at GE has voted to reduce the CEO’s annual equity incentive grant from $15M to $5M.
This shows the low faith that the BOD have in him, and this may be due to the underperformance of GE.
CEO Larry Culp, responded to the quarterly earnings report saying, that they had a strong bottom-line finish in 2021. And they are positioned to move forward.
Culp believes the transition this year (2022) will be vital, and they have a strong conviction in what they are doing. He is a believer in nuclear energy.
Current Position of GE
GE’s reign of more than a century has seen a lot of developments. There is speculation the company maybe coming to an end.
GE has been mismanaged in the last few decades, and it has declined more than 80% from its position in 2000.
GE is still a major player in the industry though, with a market capitalization of $105.08B.
It employs over 205,000 employees as per the latest statistics.
GE has multiple subsidiaries including,
- GE Capital,
- GE research,
- GE digital among a myriad of others.
The move to split the stock into the newly aforementioned industries, will be fully implemented around 2024.
GE has been struggling over the last decade with declining revenue. They hope to improve the financial position of the company, and have sold off several assets they consider insignificant in an attempt at reducing their debts.
GE has seen a modest share price hike in the last few weeks. This has been accredited to the stock repurchase estimated at $3B that occurred on 06 March 2022.
GE has also announced that it is contemplating organic and inorganic investments. GE has is also introduced three members to its board, who are all executives of different industries.
GE controls about $205B in the power, healthcare, and Aviation industries.
The restructuring is an attempt to catapult the company forward. They are hopeful to see better days ahead.
GE can recruit the best talent, having had two Nobel laureates as employees, and the former U.S. president, Ronald Reagan was also an employee.
GE has historically had major support from the U.S. government, and is still one the biggest defence contractors. Despite its collapse from its heyday, GE is still in a fairly good position.
GE has had major changes in management over the years. Some investors believe that the single factor which led to the decline of GE is its over-diversification.
This is referred to as a bloated behemoth, and investors are not even certain of the core business that the company operates in.
GE has shifted management over time, to try to return to former highs. It has not been successful, but the new CEO, Larry Culp has made major changes to try and keep it a going concern.
Culp believes that digressing into finance was a bad decision that saw the company take a hit due to the subprime financial crisis.
The emphasis on its core manufacturing and developing operations is seen as a good approach. It has rebounded in the few years, even during the pandemic. However, GE is still nowhere near to its former glory days.
GE Stock Price Chart
At the end of Friday this week on 18 March 2022, GE closed at $95.59, which was a tiny increase by 0.010% thus it was still lower than the overall market.
GE has traded at a year high of $116 and a year low of $85. It has traded at a day range of between $95-$96. The volume of shares is 6.6 million.
GE is trading at very low prices, just above the yearly lows.
GE has attributed various issues to:-
- the low prices.
- supply issues,
- and rising fuel prices are some of the main factors.
Revenue over the year was at $20.37B, down by -3.05% on an annual basis which missed the expected estimate of $21.53B.
GE had a special investor call conference to reiterate their positive outlook for 2022, but they have not quite delivered on this promise.
GE is down over the year, and diluted EPS was at -3.55 a 259% decline year-on-year.
Although GE is trading below its yearly high and way beneath its all-time highs, it is still not an attractive entry point as it may seem.
The intrinsic fair value of GE, at the moment, is estimated to be around $46-$66. GE should be around these levels for one to consider buying in.
Sentiment on GE
GE once represented an embodiment of the American dream, and a heritage for the country. It is sad to see it deteriorate in the manner that it has.
GE are too compact to become the innovative and leading developers in emerging frontiers as they were. They might recover, but this will take a long time, and might not even be a possible.
Some investors argue that companies like GE are among the ghost corporations that are artificially propped up by federal stimulus.
In case of an economic meltdown, where governments do not intervene in the free market, it could likely go under.
The company could be acquired by effective visionaries who would want it rise, to regain its former glory. GE experienced its greatest days under the legendary CEO Jack Welsh. Many believe this is what GE needs to bounce back on top.
Profits for GE
GE is fairly profitable, but its margins have rapidly declined over the years. It posted a Gross profit of $20.3B last year, which was up by $1B from the previous year.
However this is still below expectations. It has a low dividend yield of 0.33%.
Net income was at -3.84B, a -245% plunge over the year. The net change in cash was -9.34B, down by -352% and the cost of revenue was $13.01B, an annual decrease of -11.95%
GE’s cash and equivalents were at $13.47B, a -63% annual decline. The financials for GE look pretty ugly, and very repelling to investors.
Free cash flow was low last year at $1.6B.
The stock split is likely to have caused the drop in prices, and GE affirms to do better in 2022, that is, in terms of profitability.
Future of GE
GE’s – splitting the company into three different entities – will have outcomes that will set the tone for the company’s future.
GE healthcare is expected to be operating by 2023. This is a fundamental sector today, and GE will hold about 20% of the company.
Healthcare has accounted for 25% of GE’s revenue in recent years, and developments in this sector will push it to better positions.
Aviation is GE’s largest segment, and growth is expected to account for 20% of its increase in the next year.
GE will retain control of this sector, even after the stock split.
GE forecasts to do well in the coming year, projecting $6.5B in free cash flow, and an adjusted EPS of $2.80-$3.50.
Nothing can be said with certainty regarding GE, it has endured world wars and economic downturns throughout its history. It is well prepared to weather big storms that may come its way.
Overall Verdict on GE
The technical of GE indicate a waning pattern. Free Cashflow in ten years ranged from a low of -$9.4 to a high of $26.8B.
GE has a megaphone pattern that makes it seem like it’s bullish. Based on moving averages and oscillators GE stock is a suggested buy.
However, it has not gotten past the resistance point of around $115. From a swing trading perspective, short interests could be worth it.
GE will rise in the short-term, but it is bearish in the medium to long-term.
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