|Bid||0.00 x 800|
|Ask||0.00 x 1400|
|Day's Range||100.92 - 102.35|
|52 Week Range||69.20 - 104.21|
|PE Ratio (TTM)||35.54|
|Earnings Date||Jul 23, 2018 - Jul 27, 2018|
|Forward Dividend & Yield||0.48 (0.47%)|
|1y Target Est||104.00|
Just a few days ago, J.P. Morgan analyst Stephen Tusa suggested industrial giant General Electric Company (NYSE:GE) should be — if it wasn’t — mulling the possibility of yet another dividend cut. Of all the ways the company could allocate its operating cash flow in its present situation, sustaining the dividend payout seems to make the least mathematical sense.
Wabtec Corp. on Wednesday said it has entered into new financing arrangements in connection with its pending $10 billion merger with GE Transportation. The new arrangements include syndication of a $2.5 billion senior unsecured bridge commitment and $400 million senior unsecured delayed draw term loan to fund the cash portion of the merger, Wilmerding-based Wabtec (NYSE:WAB) said in a release. This provides that the bridge commitment will be reduced by any alternative financing that Wabtec arranges prior to closing, which may include additional loans or long-term notes.
The new arrangements include syndication of a $2.5 billion senior unsecured bridge commitment and $400 million senior unsecured delayed draw term loan to fund the cash portion of the merger. The new arrangements provide that the bridge commitment will be reduced by any alternative financing that Wabtec arranges prior to closing, which may include additional loans or long-term notes. In addition, the company refinanced an existing revolving credit facility with a $1.2 billion senior unsecured revolver with a five-year term, and refinanced an existing $350 million senior unsecured term loan with a three-year term loan.
General Electric recently made the headlines with an $11 billion deal to sell its GE Transportation unit to Wabtec. However, that's just one of several divestitures in the works, as GE looks to simplify its business and pay down debt.
In recent years, GE stock has provided ample profits for both bulls and bears. When I took my first crack at analyzing GE stock, I was bullish. General Electric is an American icon that has survived world wars, great depressions and perhaps President Trump.
It's been a rollercoaster ride for General Electric (GE) shareholders lately, as the market applauded its deal with Wabtec (WAB) before punishing the stock for not committing to its dividend payout for 2019. JPMorgan's Stephen Tusa, who is firmly in the bear camp, on Wednesday warns about GE Capital, which he calls an "underappreciated risk" for the shares, hitting on one of his favorite themes--that GE will still have to raise more capital.
If you own General Electric Company (NYSE:GE) stock, Wednesday’s 7.3% decline was the company’s worst day in almost a decade. “… Being deliberate and then moving when things make sense, as opposed to moving just because somebody wants us to — it’s just my style,” Flannery said at an industry conference. No amount of handholding and reassurances by Flannery is going to change the fact the hole it’s in is incredibly deep and incredibly wide.
General Electric (GE) and Wabtec (WAB) stocks have steadily moved upward since rumors of the deal to combine the Transportation segment with Wabtec went public in April. After closing slightly higher the next day, the stock took a steep fall on May 23.
GE and Wabtec: A force to be reckoned with? General Electric (GE) has been one of the oldest and top locomotive manufacturers in the world. Its rail transportation business may soon be combined with Wabtec (WAB), earlier known as Westinghouse Air Brake Technologies.
The deal between General Electric (GE) and Wabtec (WAB) is expected to generate annual run-rate synergies of $250 million by 2022 due to lower costs and higher revenues. After completing the transaction, Wabtec will have $8 billion in revenues. Currently, railroad industry (CSX) fundamentals are sort of subdued.
Railroads’ (XLI) intermodal traffic expressed in containers and trailers picked up significantly this year compared to previous years. With a rise in global trade, the tightening of truck capacity (JBHT), and the rally in oil prices, rail intermodal has begun to regain its past glory. Provisions related to capital expenditure in the Tax Cuts and Jobs Act should also pave the way for increased spending on fixed assets by rail transportation companies.
In the previous part of this series, we saw that General Electric’s (GE) Transportation segment was an underperformer in terms of revenue growth, operating profits, and operating margin growth. Wabtec’s (WAB) Freight segment also did not do well in those parameters. Note that GE manufactures diesel locomotives.
The markets expect General Electric’s (GE) deal with Wabtec (WAB) to result in a combined entity valued at more than $20 billion. In 2017, GE’s Transportation segment’s revenue was $4.1 billion. The segment manufactures passenger and freight trains, mining equipment, and marine diesel engines.
General Electric’s (GE) CEO John Flannery, who took the position last August, got a shot in the arm on May 21. GE said it would spin off its Transportation segment and simultaneously combine it with Wabtec, a manufacturer of equipment used in the railroad (TRN) industry.
The details behind the deal suggest it's good news for GE shareholders -- it but won't convince the bears watching the stock.
The Dow endured another volatile week marked by key geopolitical developments.
American Century Ultra Fund (TWCUX) got it right with Wabtec — also known as Westinghouse Air Brake. The $11.4 billion portfolio is underweight in industrials, but its managers nonetheless made room for the locomotive equipment maker, starting in 2010. "Wabtec fits our quality, durable-growth philosophy based on the management team, their track record and a business with a strong operating margin averaging 17% over the last five years," client portfolio manager Kevin Lewis told IBD.
If General Electric Co. makes another cut to its dividend in the middle of a breakup, will it still hurt? The short-term answer is yes: GE’s stock plunged on Wednesday after CEO John Flannery said the fate of the payout is partly dependent on the steps he takes to unwind the company’s conglomerate structure. Speaking at an annual spring confab for industrial bigwigs, Flannery said he needs to see how the merger of GE's transportation unit with Wabtec Corp. announced this week "plays out".
Edison and Westinghouse famously battled over the future of electrical distribution—alternating current vs. direct current—resulting in insults and publicity stunts, including Edison electrocuting animals in his New Jersey laboratory in an unsuccessful attempt to illustrate the dangers of Westinghouse’s AC. Westinghouse founded the Westinghouse Air Brake Co. in 1869 and the Westinghouse Electric Corp. in 1886.
General Electric has agreed to merge its transportation segment with Wabtec, with total proceeds to the company and its shareholders exceeding $10 billion.