Friday, May 15, 2020

ICYMI: General Electric Is Trading At 1991 Prices (GE)

We haven't done anything with the former jewel of American industrial might for two decades, although we have dozens of posts mocking and poking fun at Jeff Immelt and the whole Ecomagination spiel. From a 2010 post:

General Electric has been an investor disaster under Jeff Immelt (GE)
...I haven't owned the stock since '99. I was fortunate to not own this stock for the last decade. In the late '90's a very wealthy and very smart investor said to me:
"GE's phony-baloney earnings smoothing is going to have to end, it's approaching the level of a joke, in addition to violating the '33 act".
Sometimes you get lucky.

GE's Immelt reduced to whining after homicidal rant from Jack Welch (GE)

So it wasn't just Immelt, Welch was pretty bad as well.

And from Barron's, May 13:
Not much is going right for the iconic industrial manufacturer General Electric these days . Most of the problems aren’t the company’s fault, but the market doesn’t care about blame. GE stock hit a fresh 52-week low Wednesday.

GE stock closed down 21 cents, or 3.5%, to $5.79. It is the lowest close since Dec. 20, 1991, when the stock ended at $5.59, according to Dow Jones market data.

General Electric shares (GE) are down about 48% year to date and 55% over the past three months, worse than comparable returns of the S&P 500 and Dow Jones Industrial Average over the same periods.

The brutal declines mean investors are worried about something. Here’s a running tab of some of the issues keeping GE bulls up at night.

Aviation is GE’s largest and most profitable segment. Unfortunately, the industry is in the tank , decimated by the Covid-19 pandemic. Only about one-third of the global commercial jet fleet is flying. The rest of the fleet is parked.
Wall Street and industry insiders believe it will take years for demand to return to 2019 levels. That means fewer planes and fewer GE engines—as well as fewer shop visits to overhaul and repair the global jet fleet. Planes are serviced in proportion to they amount they are used.

Boeing CEO Dave Calhoun
New Boeing (BA) CEO Dave Calhoun is one of those insiders saying the industry won’t get back to 2019 traffic levels for years. Boeing sits atop the aerospace value chain. GE, as an engine supplier, is one tier down. Calhoun has said Boeing will slow production rates for years and suggested a major U.S. airline would probably go bankrupt in 2020. Investors might know all that, but, apparently, don’t like to be reminded. Boeing shares have fallen about 60% year to date.

The Economy
All industrial companies are affected by the state of the global economy. GE, ultimately, is a large industrial conglomerate, and its power and equipment finance businesses are affected by the state of global industrial demand. The Industrial Select Sector SPDR ETF (XLI) is down about 26% year to date. Industrial firms are suffering more than the average stock....

$5.51 last, down $0.19 (-3.33%)

And just for grins and giggle, here's Benzing on March 30:
Revisiting Harry Markopolos' Call That 'GE Is One Recession Away From Chapter 11'

I hadn't thought of 'ol Harry since August 2019's "Ex-SEC Chief Accuses Harry Markopolos of Targeting GE for a Short-Seller