GE may need radical cuts to boost its stock, analyst says


Barclays analyst Scott Davis comes up with a new benchmark for evaluating investor interest in GE: He says 80% of phone calls he received when he began covering GE in 2002 were requests for info about the company, while today the number is barely 5%.

For the phone to start ringing more often, Davis thinks GE needs to make bolder decisions and move aggressively to trim its portfolio of businesses, suggesting the company get out of banking, appliances, data centers or any other non-core, non-infrastructure based business.

Interest in other conglomerates also has faded, Davis says, concluding that the model of extreme corporate diversity no longer makes sense for investors who can spread risks around on their own via ETFs or other instruments.

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Comments (20)
  • 8747S1115R
    , contributor
    Comments (260) | Send Message
     
    I remember hearing when GE spins off Synchrony I believe they called their newly formed financial company that shareholders would be given the option to trade in 2 GE shares for 1 share of Synchrony. If this is the case I would imagine many investors fed up with GEs lack of performance will gladly trade their shares and this would drastically reduce the 10B outstanding shares which GE has on the market now which I believe is the real reason for their underperformance.
    26 Mar 2014, 07:28 PM Reply Like
  • june1234
    , contributor
    Comments (4260) | Send Message
     
    Must not have liked what he told those people who called .Stock is at the same level it was in 02 also.
    26 Mar 2014, 08:17 PM Reply Like
  • kevinconway
    , contributor
    Comments (2754) | Send Message
     
    most of what I own I bought at <10...and I should be concerned????????????
    26 Mar 2014, 08:59 PM Reply Like
  • Dr Joseph Haluska
    , contributor
    Comments (499) | Send Message
     
    I think it's good that it's only 5%. By the time new initiatives kick in, and all the (understandably) disappointed shareholders decide to "call up for requests" about the company, it will be 3 years from now, and breaking ~59, the old high. Gentlemen, place your bets......
    26 Mar 2014, 09:33 PM Reply Like
  • CapGoodsAlpha
    , contributor
    Comments (62) | Send Message
     
    Dear Joe:

     

    $40 in a couple of years? Yes.
    $59? Not before 2020 unless the market multiple seriously rises.

     

    Sincerely,

     

    Brian
    4 Apr 2014, 06:41 PM Reply Like
  • Dr Joseph Haluska
    , contributor
    Comments (499) | Send Message
     
    I totally respect your opinion, Brian, I'm just optimistic. And I'll be very happy with $40!
    Regards!
    4 Apr 2014, 08:15 PM Reply Like
  • newtothescene
    , contributor
    Comments (11) | Send Message
     
    3.+% annual dividend and 28% increase in share price since I bought GE in Jan 2012. Dumb and happy GE shareholder.
    26 Mar 2014, 11:10 PM Reply Like
  • Brice Mckalip
    , contributor
    Comments (195) | Send Message
     
    Does the metric reflect more on GE or the analyst? I don't think GE wants to be the talk of the business community like it was a couple of years ago and would prefer to be the steady business that delivers.
    26 Mar 2014, 11:11 PM Reply Like
  • CapGoodsAlpha
    , contributor
    Comments (62) | Send Message
     
    Hello Brice:

     

    GE would absolutely, positive, love to be, and crave, being the toast of the town and considered the premier multi industry company. Unfortunately the emperor lacks a full wardrobe and lost its credibility. It is now broadly considered to be, and accurately, a large reactive company that usually overpays for deals and under delivers.

     

    Sincerely,

     

    Brian
    4 Apr 2014, 06:44 PM Reply Like
  • User 6830851
    , contributor
    Comments (263) | Send Message
     
    Who gives a sh*t about Scott Davis?

     

    Steve Liesman did a piece today on GE Aviation. Something like seven U.S. factories working on a 3-4 year order backlog. If you buy GE, you get a BA play. No extra charge. This is the kind of conglomerate I could learn to love.

     

    Long GE.
    27 Mar 2014, 02:03 AM Reply Like
  • CapGoodsAlpha
    , contributor
    Comments (62) | Send Message
     
    Scott is actually a very thoughtful and creative analyst. I just happen to disagree in this case.

     

    My question to you is - why would you buy GE to play BA rather than play the name directly? Thoughts?

     

    Sincerely,

     

    Brian
    4 Apr 2014, 06:46 PM Reply Like
  • JMF53
    , contributor
    Comments (11) | Send Message
     
    Avg. 37 million shares traded per day. No one is interested? The idea of narrowing the focus to infrastructure is worth considering.
    27 Mar 2014, 07:38 AM Reply Like
  • minwyhe
    , contributor
    Comments (106) | Send Message
     
    GE has still not returned to the dividend it was paying before the latest recession and this analyst is telling management to get off it butt and do something. Management is playing games by restructuring and selling off assets which has done nothing for the investor except empty promises. Meanwhile the share price has been basically going sideways and has never returned to its pre-recession high. The company has been buying shares of itself and the price seems to do nothing. So with all these facts in place (reality) when are the shareholders going to see something to rally around.
    27 Mar 2014, 02:06 PM Reply Like
  • Dr Joseph Haluska
    , contributor
    Comments (499) | Send Message
     
    By my rough estimation:
    In 2010, GE was up ~10.28% and gave 2 dividend increases, 20% and 16%.
    In 2011............... for the year, flat.....2 dividend increases, 7% and 13%.
    In 2012.............up ~13.14%..............1 dividend increase for 11.7%.
    In 2013.............up ~14%...................1 dividend increase for 15.7%.
    In my opinion, the company is still in recovery mode, and is in better condition than ever to go on to be a great and worthwhile holding.
    "GE brings good things to life"
    long for life, and short puts.
    27 Mar 2014, 04:51 PM Reply Like
  • DUP
    , contributor
    Comments (308) | Send Message
     
    Remember when Lucent was the stock to own, where is it now? analysts are so smart, why do they have to go to work everyday? LU poof all gone, luckily I sold it before it crashed and burned, I actually made a few $10 thousands, then it died and never recovered. Just dumb luck actually. GE is in for the long haul, it's been through every calamity produced by mankind.
    27 Mar 2014, 07:59 PM Reply Like
  • Riskman
    , contributor
    Comments (194) | Send Message
     
    Who has Bell Labs? I know the Fed did not allow it to be sold off to a non-US firm.
    27 Mar 2014, 09:39 PM Reply Like
  • Ne28903
    , contributor
    Comments (4) | Send Message
     
    Typical Seeking Alpha contradictory article.
    27 Mar 2014, 09:56 PM Reply Like
  • User 11378401
    , contributor
    Comments (3) | Send Message
     
    The Dividend Yield on GE is 3.4% - whereas you're lucky to obtain .15% APY at the Bank, with an 18 month CD. Via some higher-order math,[ viz. 3.4% /.15% ] you're "only" earning 22.66 times more yield with GE, in addition to making a nice profit when you sell the stock. I second the statement : Who gives two bits as to what Barclay's Analyst,Scott Davis, says about GE -for GE is not going out of business, anytime soon, and it is one of the bluest of the blue chips on the DJIA.
    31 Mar 2014, 12:25 PM Reply Like
  • CapGoodsAlpha
    , contributor
    Comments (62) | Send Message
     
    $GE - Scott is an excellent analyst and one of my strongest competitors. However, I have a different perspective. First - in 2002 GE was coming off being a cult stock after "St. Jack" had retired. Secondly, the idea that diversified companies are out of favor because of ETFs is flawed. Incoming calls on diversified companies are down because MOST OF THE STOCKS ARE FAIR TO FULLY VALUED. If they were obsolete they would be cheap. But they are not. With respect to divesting assets we would point out the company is now fairly concentrated into FOUR areas - a simplified and understandable Finance business (getting there), energy, aerospace and healthcare. The remaining businesses - rail, lighting, and appliances - are too small to weigh on the stock. Lastly - the reason GE is no longer that "interesting" is because it is no longer that interesting. CEO Jeff Immelt retires in 7 years, will unveil his successor in perhaps 5 years, and between then and now will simply a) take out overhead, b) do bolt ons, c) seek to maximize execution on backlog, d) boost the dividend and e) repurchase stock. Not much controversy left. Respectfully submitted, Brian
    2 Apr 2014, 09:05 AM Reply Like
  • Chris Carlucci
    , contributor
    Comments (2) | Send Message
     
    I agree with Brian; Davis is a good analyst. If I recall correctly, GE was the focus of Davis' multi-industry/electrical equipment coverage launch at Morgan Stanley, and his salespeople really focused on his GE call/report. At the time, GE also constituted a much bigger portion of the S&P 500, and it was an even greater focus for those covering the industrial sector. The way we defined the broader sector, it had about a 9% weighting in the S&P 500. As a result, GE took up about 1/3 of the sector (someone could correct my math or memory!) at the beginning of 2002 (it had close to a 3% weight in the S&P 500 at that point, no?). So, analysts charged with covering the industrial sector were always keenly interested in GE because screwing up GE often meant screwing up one's year given its sector weight!
    6 Apr 2014, 06:17 AM Reply Like
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