After Friday's farcical face-ripping ramp back to recent highs (from a 10% plunge pre-market) after dismal earnings and outlook, it appears 'investors' took the weekend to actually read the report and transcripts…
Someone turn the bloody machines back on!!
Bloomberg reports that General Electric’s weak third-quarter results and outlook prompted multiple rating downgrades on Monday, with most analysts warning of an impending dividend cut. However, bullish analysts note that there doesn’t seem to be much more that bears can "fixate on from here."
RBC (Deane Dray)
- GE’s intra-day stock recovery on Oct. 20 could be the "first sign of a cathartic bottoming, supported by the draconian 2017 guidance cut and brutal assessment/frankness from the new CEO"
- Expects a dividend cut announcement before Nov. 13
- Outperform, PT $25 from $27
MORGAN STANLEY (Nigel Coe)
- Investors need to trade carefully into Nov. 13 strategy reset, given higher probability of a dividend cut to ~70c
- While new CEO John Flannery is the right man for the mission on hand, the scale of the challenges that he and his new team face are greater than earlier imagined
- Cut to underweight from equal-weight, PT $22 from $25
UBS (Christopher Belfiore)
- Downgrades on disappointing 3Q, expectation reset and dividend at risk
- Says recognizes execution risk as GE works through its strategy, but sees a lot of the negative sentiment now in the stock; says GE should trade in line with the market
- Cut to neutral from buy, PT $24 from $31
COWEN (Gautam Khanna)
- Sees a likely, sizable dividend cut and down 2018 EPS, with limited bounceback prospects in 2019
- Says it is very likely that Power profits will decline sharply in 2018, and perhaps again in 2019
- Market perform, PT $22 from $24
MELIUS RESEARCH (Scott Davis)
- "Not sure there is much more the bears can fixate on from here"
- Says the EPS reset was worse than what most expected; however, short of a recession or collapse in oil prices, it is hard to picture anything more
- Says the dividend won’t be cut as GE will focus on growing FCF and earning into it
- Buy-Accumulate; PT $35
WILLIAM BLAIR (Nicholas Heymann)
- Says GE puts its corporate transformation into overdrive; 2017, and not 2018, is now going to be GE’s trough year for adjusted EPS, with solid initial improvement expected in 2018
- Outperform
SUNTRUST (Michael Ciarmoli)
- GE’s notable strength in military aftermarket activity could be a source of upside surprise this quarter for suppliers with exposure
- Names with aftermarket exposure within SunTrust’s coverage include AAR, Barnes Group, HEICO, KLX and TransDigm
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