GE: That Was More Than Just A 'Reset'

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WG Investment Research


  • The company held an Investor Update Meeting and it was not well received by the market.
  • GE cut its dividend by 50% and guided for lower-than-expected 2018 adjusted EPS and Industrial FCF.
  • It is hard to fight the tape, but I am staying long the stock.

If you have not heard yet, General Electric (NYSE:GE) held its Investor Update Meeting on Monday, November 13, 2017. During the meeting, Mr. Flannery, CEO laid out his vision for the company and talked through his plans to reposition this storied industrial conglomerate in the quarters/years ahead. In addition to providing the 2018 Operating Framework, Mr. Flannery also discussed in great detail the reason for the 50% haircut to the dividend (from a quarterly amount of $0.24 to $0.12).

So, as you could guess, GE shares have been under pressure since the dividend cut and disappointing 2018 guidance was announced.

(Source: Nasdaq)

Taking a step back, the underperformance of GE's stock over the last year shows that it is hard to fight the tape. I have an overweight GE position in the R.I.P. portfolio so I have felt the pain over the last few days - and honestly over the last few years - but I plan to stay long the stock, even after the disappointing investor meeting.

Simpler Is Better

Investors have raised concerns about GE's use of multiple earnings and operating metrics - e.g. Continuing operations EPS, Industrial operating + Verticals EPS, Industrial CFOA, etc. - so the company has decided to simplify things. Going forward, management plans to change their reporting language with a focus on only a select few metrics:

To highlight the two most important items, the company will be using adjusted EPS, instead of a long list of earnings metrics, and will switch from Industrial CFOA to Industrial FCF. This may not sound like much but I believe that these changes will greatly improve transparency and will help eliminate the ongoing gripes from analysts about not knowing what metrics to value.

I believe that this is management's attempt to keep the Street happy and

This article was written by

WG Investment Research profile picture
Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long GE, HON, BHGE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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