Summary
- Since 2/28/19, GE stock has traded between $9.10 and $10.50, and is currently range-bound.
- This article details three key issues which are bearish for the company going forward.
- Investors should avoid going long unless and until there is much more clarity in this regard.
Investment thesis
On April 30, 2019, General Electric (GE) reported better-than-expected first-quarter sales and earnings, which prompted a brief rally in the stock. CEO Larry Culp also reaffirmed 2019 guidance, and that bolstered confidence in the company’s turnaround plan. However, since hitting a post-earnings high of $10.50 on 5/3/19, GE has trended lower and currently trades at $9.47. This article addresses three specific issues that have arisen during the second quarter, and my view is that this is likely to remain a single-digit stock for the foreseeable future.
GE Power struggles continue
My 12/31/17 article, “The NEW GE Power Faces an Uncertain 2018,” detailed the base case that the company’s $10.6 billion Alstom acquisition was the “albatross” at the crux of the dire situation at the power unit. In 2018, GE recorded a $22 billion goodwill impairment charge related to Alstom, which is currently being investigated by both the DOJ and SEC. The following Excel chart summarizes GE Power’s last three years of operating results (from the company’s 2018 10-K):
