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GE's Earnings Beat Fails To Change This Bear Analyst's Mind

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GE's Earnings Beat Fails To Change This Bear Analyst's Mind

General Electric Company (NYSE: GE) reported better-than-expected earnings Friday morning, but the figures weren't strong enough for one bear analyst to turn positive.

The Analyst

JPMorgan's Stephen Tusa maintains a Sell rating on GE's stock and discussed the print on CNBC's "Squawk on the Street" segment.

The Thesis

Despite an encouraging earnings report, Tusa said there is "absolutely no change" to his bearish stance. The reported headline profit number was "good" and the EPS was "obviously very good," but digging beyond the headline numbers paints a different picture, the analyst said. 

GE's power business was "definitely worse than expected," and strength in aviation is due to lower shipments of LEAP engines, which is a "money-losing" product, Tusa said. The analyst projects the trend will reverse in the bottom half of 2018.

While GE adjusted by about 17 cents per share last year in pension-related costs, a more appropriate number moving forward is around 24 cents per share in pension adjustments, the JPMorgan analyst said. 

GE's cash flow of negative $1.7 billion ranks as the company's second -worst cash flow performance over the past five years, Tusa said. This calls into question GE's ability to deliver free cash flow above the low end of its prior $6 billion to $7 billion estimate, he said. 

Price Action

Shares of GE were trading higher by 4 percent late Friday morning.

Related Links:

JPMorgan Lowers General Electric Price Target, Says EPS Guidance Is 'Not A Credible Number'

JPMorgan Dismisses Buffett-GE Buyout Rumor

 

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