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General Electric: A Detailed Cash Flow Analysis

Jan. 09, 2019 2:53 AM ETGeneral Electric Company (GE)40 Comments
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Okapi Research


  • GE stock price has risen in recent weeks due to reports of accelerated asset sales.
  • Asset sales alone likely won't be a panacea, due to a lack of cash flow at the enterprise level.
  • A detailed analysis of cash flow casts serious concerns over the viability of GE's turnaround without an equity raise or significant recovery in energy prices.

Recent Optimism in General Electric Stock

After 2018 saw General Electric (NYSE:GE) stock price fall 57%, 2019 is off to a good start, with the stock up 8.6% so far versus 1.7% for the S&P 500 (SPY). What is the cause for optimism? Over the past few weeks, several headlines have rumored possible deals that could help GE monetize its assets and reduce its debt load.

First came the news in November that GE would accelerate plans to sell Baker Hughes (BHGE) and raise $4 billion through an equity issuance. Then, it was reported in December that the company had filed for the IPO of its Healthcare division. Finally, last week it was rumored that GE could sell its aircraft leasing unit for as much as $40 billion.

This flurry of news, along with a sub-$7 share price, caused GE’s most prominent bear, J.P. Morgan’s Steve Tusa, to upgrade the stock from Sell to Neutral. The share price has rallied over 20% since the analyst upgrade. Despite the upgrade, Tusa has noted that asset sales alone will not be enough to cover net liabilities (including an unfunded pension) of approximately $107 billion. Tusa and many investors share the belief that GE will need a massive equity raise in 2019 to right the ship.

The key issue at GE is that it has significant liabilities to service over the short, medium, and long term, but has no cash flow at the company level. Let’s take a closer look at the numbers, first at the enterprise level and then at the segment level.

Enterprise-Level Cash Flow Analysis

I recently wrote a detailed article explaining how the company got to this point. If you are unfamiliar with the struggles at GE, I recommend you read that explainer first. In this article, I will focus on the numbers.

This article was written by

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I share my thoughts on interesting companies I am investing in or have researched. I am agnostic to investing in growth, value, long, or short.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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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