GE NOT BRINGING GOOD THINGS TO INVESTORS – Todd Horwitz, Bubba Trading

 

GE Hits New Low

General Electric Co.’s shares continued their long slide Monday even as new Chief Executive Larry Culp tried to put the market at ease about the direction of the conglomerate and its troubled power division. The stock fell as much as 10% Monday before recovering some of its loss to end at $7.99, down 6.9%. It was its first drop below $8 on an intraday and closing basis since March 2009.

The latest decline came after Mr. Culp said the company’s power business is “getting close” to a bottom in an interview Monday with CNBC, indicating that woes for the unit could continue. That business has been plagued by issues like dropping global demand and turbine blade failures, which have contributed to the stock’s swoon in recent months.

GE management is “working hard with the power team” to turn the struggling business around, Culp said. He did not have conviction “to offer up numbers” for how power will end the year, but Culp said GE “will in time.”

Questions about GE’s liquidity are understandable, Culp said, given the company’s position. But Culp said GE “put that to rest given that fact the we got $20 billion of cash” on hand from asset sales. Culp also said GE has used only $2 billion of “$40 billion of bank lines.”
”That gives us a foundation to really talk to the leverage,” Culp said. As the company has noted previously, Culp said GE “has no plans for an equity raise.”

Culp was appointed chairman and CEO on Oct. 1, a month before GE reported third-quarter profits that were sharply below forecasts. Additionally, GE slashed its quarterly dividend to a penny a share in a dramatic first move for Culp. While the cut will free up cash for GE, the overall results gave some on Wall Street conviction that GE shares will continue to fall.

Todd “Bubba” Horwitz

Financial Markets and Political Commentary

 

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About the author

Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.