Market Overview

General Electric Dividend Cut Likely In The Works

Share:
General Electric Dividend Cut Likely In The Works
Related GE
Jim Cramer's Ways To Spot A Dividend Cut Coming
General Electric's Liquidity Problem
Weekly Top Insider Buys Highlight for the Week of Nov. –6 (GuruFocus)

After more than a decade of underperformance, General Electric Company (NYSE: GE) may have finally found the right CEO to lead the company into its next era of prosperity. Unfortunately for GE investors, Morgan Stanley has downgraded GE stock from Equal-Weight to Underperform and said on Monday that there could be more pain ahead for GE in the near term.

According to analyst Nigel Coe, GE will need to majorly reset 2018 earnings expectations heading into its upcoming shareholder update coming in November. Morgan Stanley has cut its 2018 EPS estimate from $1.40 to $1.06, and Coe says a dividend cut is likely as well.

“We believe investors need to take action to protect against the possibility of near term underperformance in the event of a dividend cut in November and this is clearly an additional factor in our rating change,” Coe wrote.

Despite the fact that GE stock is down another 28 percent year to date, Coe said the downside associated with a dividend cut is not yet fully priced into the stock.

Coe said long-term investors should rest assured that new CEO John Flannery is the right man to take on the daunting task of righting the GE ship. However, his turnaround may require GE to dial back its capital return, a decision that the market may not take kindly.

Coe said even optimistic GE bulls need to keep earnings expectations in check. He said the possibility of GE earning $1.40 per share in 2020 would be a “pretty heroic recovery.”

Coe said GE should cut its current 96-cent dividend to around 70 cents. In addition to the downgrade, Coe lowered his price target for GE stock from $25 to $22.

At time of publication, shares of GE were down 5.14 percent at $22.60.

Related Link: Has General Electric Finally Found A Capitulation Bottom?

_________
Image Credit: By Xnatedawgx (Own work) [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0) or GFDL (http://www.gnu.org/copyleft/fdl.html)], via Wikimedia Commons

Latest Ratings for GE

DateFirmActionFromTo
Nov 2018CitigroupMaintainsBuyBuy
Oct 2018BarclaysMaintainsOverweightOverweight
Oct 2018Deutsche BankMaintainsHoldHold

View More Analyst Ratings for GE
View the Latest Analyst Ratings

Posted-In: Analyst Color News Short Ideas Dividends Dividends Downgrades Price Target Analyst Ratings Best of Benzinga

 

Related Articles (GE)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
LXFTKeyBancDowngrades0.0
CPAImperial CapitalDowngrades68.0
PRMWImperial CapitalInitiates Coverage On18.0
TGTKeyBancInitiates Coverage On110.0
QCOMMorgan StanleyUpgrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Spotify Could Be A $100 Billion Company

Does Roku's Place As Streaming Market Leader Make It A Buy?