General Electric Co. (NYSE: GE) is scheduled to release its most recent quarterly results before the markets open on Wednesday. The consensus estimates call for $0.29 in earnings per share (EPS) and $33.99 billion in revenue. In the fourth quarter of last year, GE said it had EPS of $0.46 and $33.09 billion in revenue.
Just when investors were looking at GE stock as a good value, the stock got hammered last week following the company’s statement that it will take a $6.2 billion after-tax charge in the fourth quarter of 2017. The charge is related to GE Capital’s run-off insurance portfolio, which the company has been winding down.
Along with the tax charge, the company is setting aside $15 billion over seven years for higher insurance reserves at its GE Capital unit. This is broken out as $3 billion as a statutory contribution in the first quarter of 2018 and approximately $2 billion annually from 2019 to 2024.
CEO John Flannery has now said that GE is reevaluating its strategy and its structure. He addressed shareholders in a conference call last week discussing how management is evaluating the best structure or structures for GE’s broad business portfolio in an effort to maximize the potential of its businesses.
While GE Capital will fund the contributions, the company further outlined that GE Capital will suspend its dividends to its parent company for the foreseeable future and that $3 billion of the planned GE Capital dividends to the parent are foregone. The result over the next two years will make GE Capital smaller, which the company maintains will be more focused and restore its capital ratios to appropriate levels.
The question is if earnings can fight against this tide.
Excluding Tuesday’s move, GE has vastly underperformed the broad markets, with its stock down 7% year to date. Over the past 52 weeks, the stock is down 47%.
A few analysts weighed in on GE ahead of the earnings report:
- Merrill Lynch has a Neutral rating with a $17 price target.
- Vertical Research has a Hold rating with an $18 target.
- Deutsche Bank has a Sell rating and a $15 price target.
- JPMorgan has a Sell rating.
- Tigress Financial has a Hold rating.
- Stifel has a Neutral rating with an $18 price target.
Shares of GE traded up about 3% to $16.72 on Tuesday, with a consensus analyst price target of $21.35 and a 52-week range of $15.80 to $30.59.
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