Obama bailout recipient GE shares break below $18 as two-day loss reaches 12%; Wall Street expects more bad news

[Leroy N. Soetoro]

https://www.cnbc.com/2017/11/14/wall-street-is-stunned-after-general-
electrics-unsettling-investor-day.html

Wall Street analysts expressed disappointment and concern over the
turnaround plan General Electric presented Monday.

RBC Capital Markets analyst Deane Dray sees "few reasons to believe the
stock bottoms here."

GE's stock declined 5.9 percent Tuesday, bringing its two-day loss to more
than 12 percent.

The rough year for General Electric shareholders will not end anytime soon
because the company's new turnaround plan did not meet expectations,
according to Wall Street analysts.

GE shares had their worst day since 2009 on Monday, falling 7 percent
after the company reduced its dividend and unveiled a restructuring plan
during its investor day. It was the company's first investor day under CEO
John Flannery, who replaced Jeff Immelt in August.

RBC Capital Markets lowered its rating to sector perform from outperform
for General Electric shares, saying the company did not present a credible
plan to fix its businesses.

"We attribute the sharply negative stock reaction to the Nov-13 unveiling
of new CEO John Flannery's turnaround plan to a number of disappointments
and unsettling disclosures," analyst Deane Dray wrote in a note to clients
Tuesday. "Turnaround plan fell short of the sweeping reset of the business
model/portfolio many had hoped for. [There are] few reasons to believe the
stock bottoms here."

Dray reduced his price target for General Electric shares to $20 from $25,
representing 5 percent upside to Monday's close.

GE's stock declined 5.9 percent Tuesday to $17.90, bringing its two-day
loss to more than 12 percent. The shares were at levels last seen in 2011.

The analyst said the company's admission that it paid out a dividend that
was more than its industrial cash flow for years was "particularly
damaging."

"We believe the new disclosures at GE's analyst meeting suggest deeper
structural problems than we had anticipated," he added.

Goldman Sachs is concerned over the company's 2018 financial guidance.

"The weaker than expected 2018 EPS/FCF guide and a lack of clarity around
the path to improvement in 2019/20 surprised us negatively," analyst Joe
Ritchie wrote in a note to clients Tuesday entitled "Investor day recap:
Reset happened, guide worse than expected, questions loom."

General Electric guided 2018 earnings before interest and taxes for its
industrials business to $14 billion versus Goldman's $16 billion estimate.

"We believe a firmer view that 2018 is the bottom or 'last cut' and a
quantifiable path to improvement beyond 2018 is needed to have a more
constructive view on the shares," Ritchie wrote.

The analyst said his earnings estimates and price target for General
Electric are under review.

Deutsche Bank believes credit analysts will now downgrade General
Electric's debt.

"GE's analyst meeting surprised on several fronts. … The dividend cut to
48 cents was steeper than we expected," analyst John Inch wrote in a note
to clients Tuesday. "We continue to expect downgrades of GE's debt to be
forthcoming. While credit analysts will likely welcome the cut to GE's
dividend, the company also laid out a framework of still difficult cash
generation over the next 2 years."

Inch reiterated his sell rating and $18 price target for General Electric
shares.

General Electric stock is significantly underperforming the market this
year. Its shares have declined nearly 40 percent year to date through
Monday versus the S&P 500's 15.5 percent return.

The company did not immediately respond to a request for comment.


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