General Electric: What To Look For In 2018

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WG Investment Research
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Summary

  • GE's shares have underperformed the broader market by a wide margin so far in 2017.
  • I will cover the three things that I will be looking for in 2018, as GE's management team tries to win back the market.
  • GE is a long-term buy at today's price.

General Electric (NYSE:GE) is a company that I have closely followed since 2014, and it would be an understatement to say that the stock performance for this storied industrial conglomerate has been a major disappointment in 2017. So far this year, GE shares have underperformed the broader market by 63 percentage points.

Source: Nasdaq

There is no denying the fact that GE's new CEO, Mr. John Flannery, has his hands full as we head into 2018, but, in my opinion, there are three things that management can do to improve investor sentiment over the next 12 months. Therefore, I believe that investors with a time horizon longer than one to three years should seriously consider hanging onto their shares.

What To Look For In 2018

To start, investors that expect for GE shares to trade in the lower $30 per share range in 2018 should really take some time to reset their expectations. GE’s stock is trading below $18 per share for legitimate reasons and, while I believe this company is still a great long-term buy at today's price, the next 12-18 months will likely be a bumpy ride.

The dividend cut is coming into play, but GE’s largest operating unit, Power, has been the main source for the recent downward movement in the stock price. Management has heavily relied on this operating unit to meet (or beat) numbers for years now, so it is going to be tough sledding for GE heading into 2018. Expectations for this division have already been reset by Mr. Flannery (read more about the 2018 Investor Meeting here) so we are now at a point where investors should start to bake in expectations for this operating unit to be more of a drag than a tailwind, for at least the next four to five quarters. But

ChartGE Total Long Term Debt (Annual) data by YCharts

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This article was written by

WG Investment Research profile picture
8.34K Followers
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, BHGE, HON. 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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