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The Journal Gazette

  • Bloomberg An employee unwraps turbine components inside the General Electric power plant in Veresegyhaz, Hungary. The company's stock price is reaching lows not seen since the recession and could fall even further.

Saturday, November 10, 2018 1:00 am

GE stock plummeting to new low

Analyst's pessimism in $6-a-share target sparks sharp decline

Esha Dey and Joshua Fineman | Bloomberg

General Electric plunged toward its recession-era low as the company's most bearish analyst said the plummeting stock price is poised to fall further.

JPMorgan Chase analyst Steve Tusa on Friday slashed his price target to $6, the lowest on Wall Street, citing rising liabilities, a weakening cash-flow outlook and poor third-quarter results on “almost all fronts.”

“While the stock is down about 70 percent from the peak of $30, this move still does not sufficiently reflect the fundamental facts,” Tusa said in a note to clients.

The pessimistic view from Tusa, who has been prescient in predicting GE's collapse in recent years, fueled a share decline that has wiped out $200 billion in market value since the end of 2016. GE is grappling with one of the deepest slumps in its 126-year history amid weak demand for gas turbines, federal accounting investigations and heavy debt.

The shares tumbled 10 percent to $8.19 at 11:21 a.m. in New York after declining to as little as $8.15, the lowest intraday price since March 2009. That was the same month GE fell to $6.66, the stock's nadir during the global financial crisis.

Shares closed Friday at $8.58, down 52 cents in trading on the New York Stock Exchange.

The Boston manufacturer said it was taking steps to shore up its business. GE has been streamlining its portfolio to focus on power equipment, jet engines and renewable energy.

“GE is a fundamentally strong company with a sound liquidity position,” the company said by email. “We are taking aggressive action to strengthen our balance sheet through accelerated deleveraging and position our businesses for success.”

The company announced the surprise appointment of Larry Culp as CEO last month, replacing John Flannery. Culp must still face up to a weakened outlook for earnings per share, Tusa said.

“We are skeptical around calls for a bottom until management resets (earnings per share) expectations that are closer to free cash flow, something we believe they haven't done for almost 20 years,”' he said.

GE's third-quarter results, reported last week, missed analysts' estimates, while the company also slashed its dividend and revealed an expanded federal probe into its accounting.

Tusa's concerns were echoed by Bloomberg Intelligence analyst Joel Levington, who said the company's regulatory filings contained comments about “on- and off-balance-sheet liabilities, contingencies, lawsuits and liquidity items, which, taken together, reinforce our concerns about GE's credit risk.”