U.S. Markets open in 7 hrs 3 mins

The Zacks Analyst Blog Highlights: General Electric, Baker Hughes, Comcast, Honeywell and United Technologies

Zacks Equity Research
Teva Pharmaceutical Industries Ltd. (TEVA) closed at $21.45 in the latest trading session, marking a +0.85% move from the prior day.

For Immediate Release

Chicago, IL – Jan 18, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include General Electric GE, Baker Hughes BHGE, Comcast CMCSA, Honeywell HON and United Technologies UTX.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Wednesday’s Analyst Blog:

Is GE’s Breakup Plan Too Little, Too Late?

We should have known something big was coming when General Electricslashed its dividend in half last November, and now, it looks like the industrial and infrastructure giant is mulling a restructuring move that would break up the company.

The speculation began when GE announced that it will be taking an after-tax GAAP charge of $6.2 billion to its fourth quarter earnings—at the new 21% tax rate, the charge will be $7.5 billion—a significant hit that is linked to weakness in the company’s North American Life & Health insurance portfolio.

This is a shining example of the difficulties GE and other long-term care insurers and re-insurers have faced over the years. Because of the rise in healthcare costs, and the simple fact that people are living longer, many insurers are struggling to “make good on policies dating back to the 1990s,” notes Reuters.

GE also said that over the next seven years, it’s financing segment GE Capital would make $15 billion statutory reserve payment contributions to the long-term care insurance assets. But in order to fund this, the company will be suspending GE Capital’s dividend for the “foreseeable future.”

In a conference call with analysts, CEO John Flannery said that “We are looking aggressively at the best structure or structures for our portfolio to maximize the potential of our businesses,” and a review “could result in many, many different permutations, including separately traded assets really in any one of our units, if that’s what made sense.”

“Needless to say, at a time when we are moving forward as a company, I am deeply disappointed at the magnitude of the charge,” Flannery said on the call. “It’s especially frustrating to have this type of development when we’ve been making progress on many of our key objectives.”

Not only is Flannery seemingly implying that a breakup for GE is on the horizon, but sources told CNBC’s David Faber that a split is “likely,” and could come as soon as this spring.

Shares of GE closed the day down almost 3% to $18.21 per share.

A Fading Icon

When Flannery took over from previous CEO Jeffrey Immelt last August, he had big plans for GE. He made a promise to consider all options for the company, and emphasized a business strategy that would concentrate on jet engines, health-care machines, and power-generation equipment.

Fast forward to November, and you could see those plans beginning to come into focus, though some cost cutting and other major business decisions had to happen first. Besides its dividend cut, GE is planning over $2 billion in cuts this year, along with $20 billion in divestments over the next year or two.

This could include the potential sale of oil and gas company Baker Hughes; GE just bought a majority stake in BHGE last year, and the consolidation of each respective company’s oil and gas businesses is going smoothly. GE previously sold its real estate portfolio, its water business, its unit that makes electrical equipment for utilities, its dishwasher and appliance business, and sold its media properties NBC and Universal Studios to Comcast.

Additionally, the company said that there will be “ongoing actions” to shrink GE Capital’s business over the next two years, continuing a plan set in motion back in 2015 to sell the majority of its finance division’s operations.

Too Little Too Late?

While its insurance arm has certainly been struggling, it’s just another problem in a long list of problems for GE.

The company was the worst performer on the Dow in 2017, with shares losing almost 40% in value. Margins have been on the decline since 2014, and the company’s free cash flow has grown less and less consistent, especially after it decided to sell its very lucrative lending business.

Since its founding in 1892, GE grew into a business icon, creating a portfolio along the way that spanned everything from energy and infrastructure to finance and media. The company was once looked to as a reliable symbol of American success, and during the ‘80s and ‘90s, its management practices gained a huge following under then-CEO Jack Welch.

Under Jeffrey Immelt, GE began to shrink, with a goal of focusing on businesses it could win in and getting rid of the ones that were distractions. But compared to other multinational rivals like Honeywell and United Technologies, GE’s continued underperformance became even more glaring.

What’s next for the company? If a breakup is on the docket, GE and its management must make sure that each of its core businesses are performing at the levels where they need to be, and that may be a tough thing to accomplish.

But even if GE decides to split up, what’s the guarantee that the move will help the company bounce back? Flannery’s narrowed vision certainly has potential, and a fresh leader at the head of the table is never a bad thing for an older institution like GE. However, with a weakening brand name and strong growth competitors, a breakup may not be the easiest fix for GE after all.

GE reports its fourth-quarter earnings on January 24.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation. See Them Free>>

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1 Stock of the Day pick for free.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Strong Stocks that Should Be in the News

Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.

Follow us on Twitter: https://twitter.com/zacksresearch

Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

https://www.zacks.com/

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Comcast Corporation (CMCSA) : Free Stock Analysis Report
 
Honeywell International Inc. (HON) : Free Stock Analysis Report
 
United Technologies Corporation (UTX) : Free Stock Analysis Report
 
General Electric Company (GE) : Free Stock Analysis Report
 
Baker Hughes Incorporated (BHGE) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research