General Electric (GE): Should You Grab the “Falling Knife?” This Analyst Says No


General Electric Company (NYSE:GE) is lower on Tuesday, and, at the risk of sounding like a broken record, there’s yet another analyst note cautioning investors to stay away. Oppenheimer’s Christopher Glynn reiterates an Underperform rating on GE, while cutting his forecasts for the industrial giant.

Glynn wrote, “We are trimming adjusted 1Q18E EPS by $0.04 to $0.13, with -$0.03 for better calibration of timing of impacts on revenue recognition standards changes at Aviation (1Q incurs majority of roughly $800M annual EBIT reduction – noncash revenue/ profit recognition) and -$0.01 from higher tax rate. We are trimming ’18E EPS by $0.03 to $0.95, including -$0.02 from HT tax rate assumption (vs. MT-HT prior), and ’19E by $0.03 (-$0.02 tr, -$0.01 slightly lower Aviation baseline). We model ’18E FCF of $6.2B (vs. $6.4B prior) and ’19E FCF remains $6.1B. Balance sheet liability funding mechanisms remain interesting/fairly constructive from perspective of answering insurance reserve requirements and pension deficits, but still walking a fine line.”

“Excluded from FCF guidance ($6-7B 2018), $6B of expected debt-funded pension contribution should reduce the deficit on funded plans to $16B against end 2017, when GE’s funded pension obligations of $93.6B compared to $71.6B of plan assets. This excludes $6.7B of unfunded, pay-as-you-go supplementary/ executive plans,” the analyst added.

From tariffs to liquidity and free cash flow, there’s no shortage of concerns that Wall Street has about GE. According to TipRanks’s data, 9 out of 15 analysts who cover Zillow stock rate it as a Buy, 7 rate it as a Hold, and only one rates it as a Sell. The 12-month month price objective on the stock is $116.86, which represents upside potential of 37.06% based on current stock price.