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3 Takeaways From General Electric's 10K

Wayne Duggan

A strong start to 2020 for General Electric Company (NYSE: GE) ran out of steam in February thanks to the coronavirus. However, there are several key themes in GE’s recent 10K filing that suggest the GE rally could resume.

The GE Analyst

Bank of America analyst Andrew Obin reiterated his Buy rating and $16 price target for GE stock.

The GE Thesis

Obin said there were three major themes he saw in GE’s 10K:

  • The drag on free cash flow from customer receivables sales in 2019 was $2.1 billion. Obin estimates Industrial FCF will experience another $1.6 billion in drag from supply chain transformation in 2020, but decreased factoring will lower that type of drag in subsequent years.
  • GE’s simplification efforts are paying off. Compared to last year, GE has 38% fewer manufacturing sites, 16% lower gross Industrial debt, 10% fewer subsidiaries and 8% lower functional costs, yet its adjusted GE Industrial operating profit was up 7% in 2019.
  • Efforts to reduce pension and long-term care liabilities are being offset by lower interest rates. Obin said pension freezes created a $3.5 billion benefit, but GE’s primary pension deficit still expanded by $600 million due to a lower discounted rate.

After looking over the 10K, Obin remains bullish on GE and is looking ahead to the company’s March 4 investor call as the next bullish catalyst for the stock.

“We note that the company has undergone a significant reinvestment cycle, positioning it well from a competitive standpoint,” Obin wrote in a note.

Benzinga’s Take

The good news for GE investors is that it seems the worst of the company’s financial problems are now behind it. However, for now at least, GE remains a show-me stock in terms of its ability to generate consistent, long-term earnings growth.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Related Links:

Gordon Haskett Upgrades GE, Says Stock Is Now 'Beat And Raise Story'

BofA Upgrades GE On 'Improving' Free Cash Flow Trajectory

Photo credit: Momoneymoproblemz, via Wikimedia Commons

Latest Ratings for GE

Date Firm Action From To
Feb 2020 Gordon Haskett Upgrades Underperform Hold
Jan 2020 B of A Securities Upgrades Neutral Buy
Jan 2020 Morgan Stanley Upgrades Equal-Weight Overweight

View More Analyst Ratings for GE
View the Latest Analyst Ratings

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