Is it Time to Buy $GE Yet?

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Thanks to Jeffrey Immelt, after the financial crisis he divested many of GE's 'toxic' financial divisions at the bottom and legged into the hot oil sector instead. With oil on the rise, Immelt was sure to make a killing, that was up until the business topped -- leaving him with a flaming bag of shit to stomp out. But instead of stomping it out, Jeff took is hundreds of millions and retired, leaving the flaming mess on John Flannery's doorstep. Today Flannery slashed the dividend by 50%, hoping to rescue some cash flow. I say 'hope' because cash flow has been disappearing on its own for the past two years -- ever since WTI topped. Cramer said owning GE was one of the worst mistakes of his career. Sadly, because of the rapidly decreasing earnings and declining sales, GE isn't cheap on a historical basis, based on p/b,/p/s,p/e ratios. As a matter of fact, at 28x earnings and 1.7x sales, the stock is still at the top end of valuation, dating back 12 years. This is what the company noted during their analyst day today.

Expect a higher tax rate in the high teens in 2018 as compared to mid teens in 2017. Baker Hughes on good trajectory (BHGE). Transportation continues in a soft market; sees 2018 as a trough year. Says smaller board with new skills; will make it easier to debate. Says digital continues to be a key area for the business moving forward. Simplicity in segments and earnings is key. Businesses have to run themselves, can not run them from the center.

And during their October earnings conference call, this is what they said.

"We need to make major changes" "Our results are unacceptable to say the least" Focusing heavily on culture of the company Started plan to lower costs by $2 bln in 2018 (Prior target was $1 bln). Co to "Simplify and Focus its portfolio": Targeting +$20 bln of exits in the next 1-2 years Will share more in November about capital allocation to improve cash generation. Have to manage company for cash and profitability in addition to growth. Working on changes to compensation plans.

The stock is down 40% for the year and +7% over the past 5 years, underperforming the S&P by 99.5% over the same timeframe. Will GE get booted from the Dow 30?


bonin006 Mon, 11/13/2017 - 20:32 Permalink

I don't remember who said it, but someone recently gave this advice on GE:Wait until they get booted from the DOW, then buy them. There does seem to be many cases where stocks booted from the DOW go on to increase much more than their replacement. (not saying I will do it, but worth thinking about)

ElTerco Mon, 11/13/2017 - 20:38 Permalink

Jack Welch knew damn well what he was doing. He financialized GE like gangbusters until growth peaked, then got the hell out before it all came apart.

New_Meat Mon, 11/13/2017 - 20:42 Permalink

Hey, Fly, GE was BK in September '08, after GE Capital imploded and couldn't stand the cash for GE's paychecks.  GE Re was Saint Jack's piggy bank and was north of $9BB in the hole as a part of the Swiss RE acquisition.  Ol' Warren himself (no practicioner of MPT) took 'em to the cleaners.Barrons back issues have the articles and Welch/Immelt's weak-assed response.  Immelt got to have his testicles cut off as a part of Dear Leaders whatever commission.They can't stand high-tax CT so they are moving into the Commonwealth here.  Doubt that will work out.  Maybe they'll be looking to hire Tech Tools to work their asses to the bone.Couldn't happen to a better outfit.- Ned

Branded Tue, 11/14/2017 - 01:22 Permalink

 "With oil on the rise, Immelt was sure to make a killing, that was up until the business topped -- leaving him with a flaming bag of shit to stomp out." GE wasn't left with a flaming bag of shit - GE IS a flaming bag of shit, and has been since it was completely financialized by Welch in at least the early 90s.Everyone who ever worked at Capital, along with the other Bankers should be tried criminally for the 08 implosion.Every dime ever made for the past 50 years by that corporation and its officer level staff (and their families) should be clawed back and used to pay for the clean-up of the countless Superfund Sites littered around the country from their abandoned industrial facilities.Of course, then there's Fukushima - that will be this company's legacy - Eco-Fucking-Imagination my ass.

BendGuyhere Mon, 11/13/2017 - 23:16 Permalink

GE was impossibly stovepiped 50 years ago.Then Jack began asset stripping....GE has scoured the globe for absolute rock-bottom labor.It really deserves to die. Like IBM. Just another dead legacy brand.

hedge4Gain Tue, 11/14/2017 - 06:09 Permalink

Jeffrey Immelt was Obama's boy, Jeffrey bent over to please Obama with blinders on and went down the green energy road that was born from fantasies of faults science.  Without support from our tax dollars green energy would have died at its beginnings, when Obama left office all past and future green energy will eventually die in the hole of fake science.  Anything supported by tax dollars should be avoided like an IED in the middle of the road   including Tesla. Any Green Energy lacks a continous chain of energy, that is provided by coal, gas, oil and nuclear. One cannot deny night and day.