General Electric (NYSE: GE) is going through a rough patch lately, and it seems like the confidence of the market participants have also started to decline. As a result, the stock price witnessed significant downtrend on November 12, 2018 and settled at US$7.99 reflecting a fall of US$0.59 per share or 6.88%. The new chief executive officer or CEO of the company tried to convince the investors, but it seems like that the efforts of the key personnel failed. The top management of the company highlighted the sense of urgency in reducing the debt as well as unloading the assets. The stock price of the company has been disappointing the investors primarily because of the lower demand for the gas turbines, elevated levels of the debt as well as federal accounting probes.
The market participants are also pessimistic about the expected performance of the General Electric because of increased pressure of the liabilities as well as weaker outlook in regard to the cash flow. The management of the company stated that it has a number of options which could help the company to reduce the debt pressure. John Flannery, ex-CEO of the company, had stated certain plans regarding the spin-off of the GE’s medical equipment business as well as unloading of the majority holding in Baker Hughes. The present CEO of the company has maintained its entire focus on reducing the debt levels as he stated that bringing the leverage levels down is the top-most priority.
The elevated levels of debt have also been impacting the shareholders as the company has reduced the quarterly dividend so that its debt levels can be reduced. The market players are not at all positive about the company’s power business as well as cash flows. According to them, these factors would continue to weigh heavily on the financial standing of the company. The aviation business of General Electric has been regarded as “crown jewel” by Larry Culp. According to him, even though the company has no plans to raise funds by unloading the shares, it might need to rethink about that decision if the need arises in the future.
The management of the company also stated that the power business of General Electric is near its bottom. The turbine blade failures, as well as weaker global demand, has weighed heavily on the power business which, in turn, significantly impacted the stock price of the company. The power business of the company has reduced $700 million with respect to the costs this year. These operations have also reduced the facility footprint. According to the new CEO, Culp, the business is having $7 billion in regard to the annual costs. The retail investors are unloading the shares of General Electric post the reduction of the dividends. Mr. Culp has been trying to convince investors that the company does not have liquidity issues as it has access to the credit lines amounting to approximately $40 billion. He also stated that the company is reducing the debt in the balance sheet by asset sales.
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkinemedia.com and associated websites are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.
There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.
As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.