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Are GE's Guidance Cuts Finally Over? Analysts Speak Up On Company's Financial Update

Wayne Duggan

General Electric Company (NYSE: GE) investors weren’t impressed by CEO Larry Culp’s pledge for transparency on Thursday, sending the stock lower on Friday.

GE released updated financial guidance Thursday, calling for 2019 EPS of between 50 cents and 60 cents, below consensus estimates of 67 cents. GE also said it's anticipating negative Industrial free cash flow of up to $2 billion this year.

In an interview with CNBC’s Jim Cramer, Culp said the company is transitioning to a new era of transparency about its current problems and its path forward.

“I think what we're gonna try to do, frankly, is to share with people in as transparent a way as we possibly can, what those issues are ... and the plan that we have,” Culp said.

Several analysts weighed in on GE following the latest update from the company. Here’s a sampling of what they had to say.

Guidance Cuts Finally Over?

UBS analyst Peter Lennox-King said the latest update may finally be the long-awaited floor of the negative earnings and cash flow revisions.

“By putting numbers around the many drags on its capital which once seemed like bottomless pits (Power & Industrial FCF, Long-Term Care, leverage), over the past few weeks GE has shifted its narrative away from the downside and onto the business – and stock – recovery,” Lennox-King wrote in a note.

Bank of America analyst Andrew Obin said the 2019 outlook wasn’t as bad as some have feared, and GE said its struggling Power unit finally hit an earnings bottom in 2018.

“We are in the more cautious camp for now, forecasting $0.5bn loss in Power in ’19,” Obin wrote.

The Right Path Forward

Gordon Haskett analyst analyst John Inch said a major uptick in high-level management compensation stood out in the new proxy.

“We believe that retaining key talent has become paramount for GE – further evidenced by the hiring of a new head of human resources in Feb,” Inch wrote.

CFRA analyst Jim Corridore said GE is making the right long-term moves for its balance sheet, and more transparency is always a good decision.

“While lowered guidance is not a positive, we think GE's plan and progress show it's moving in the right direction,” Corridore wrote.

Ratings And Price Targets

  • Gordon Haskett has an Underperform rating and $7 target.
  • UBS has a Buy rating and $13 target.
  • Bank of America has a Neutral rating and $12 target.
  • CFRA has a Buy rating and $13 target.

GE's stock was down 3 percent at $9.99 per share Friday afternoon.

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Photo by Bubba73/Wikimedia.

Latest Ratings for GE

Date Firm Action From To
Mar 2019 Barclays Maintains Overweight Overweight
Feb 2019 RBC Capital Maintains Outperform Outperform
Feb 2019 Vertical Research Downgrades Buy Hold

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