Wall Street Weighs In On General Electric's Investor Call, Coronavirus Impact

On Wednesday, General Electric Company GE held an investor call to update shareholders on its financial outlook.

GE management said the coronavirus outbreak will reduce first-quarter industrial free cash flow by between $300 million and $500 million and operating income by between $200 million and $300 million. GE is now on track to report first-quarter FCF of negative $2 billion on adjusted EPS of 10 cents, below consensus analyst estimates of 13 cents.

Despite its significant operations in China, GE maintained its previous full-year FCF guidance range of between $2 billion and $4 billion.

“It’s a volatile fluid situation, unpredictable in many respects,” BE CEO Larry Culp said of the coronavirus outbreak.

Voices From The Street

Several Wall Street analysts have weighed in on GE stock following the call. Here’s a sampling of what they’ve had to say.

Bank of America analyst Andrew Obin said the call confirmed GE’s improving FCF trajectory.

“We view Power’s outlook (return to positive FCF in 2021) as the most encouraging data point from GE’s Investor Outlook call,” Obin wrote in a note. He said GE’s reported agreement with Boeing Co BA regarding payments related to the grounded 737 MAX was also good news for GE’s Aviation unit.

Morgan Stanley analyst Joshua Pokrzywinski said GE’s near-term outlook is clearly extremely sensitive to the COVID-19 outbreak, but its potential cash flow growth in 2021 appears to be unchanged.

“COVID-19 clouds the narrative from Aviation and rates, but the strong 2021 cash remains intact,” Pokrzywinski wrote. He projects GE will add $2.6 billion in FCF next year.

Credit Suisse analyst John Walsh said GE’s risk-reward skew is shifting more positively.

“As we digest the outlook call, there are more positives than negatives and we therefore would not be surprised to see GE catch a bid in the near-term,” Walsh wrote. However, he said GE is now in a much better financial position following the sale of its BioPharma unit, which is expected to close by the end of the first quarter.

GE Ratings And Price Targets

• Bank of America has a Buy rating and $16 target.
• Morgan Stanley has an Overweight rating and $14 target.
• Credit Suisse has a Neutral rating and $13 target.

GE's stock traded lower by 4.2% to $10.49 per share at time of publication.

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