Entering text into the input field will update the search result below

General Electric: NewCo Remains A Disaster

Feb. 01, 2019 11:41 AM ETGeneral Electric Company (GE)BKR87 Comments
Shock Exchange profile picture
Shock Exchange


  • GE reported another poor quarter for NewCo.
  • NewCo's Q4 revenue was flat Y/Y, but segment profits fell by over 40%.
  • Power's operations remain in disarray and GE Capital will create more cash burn this year.
  • As long as the rating agencies do not downgrade GE again then investors can speculate in the stock.
  • GE remains a sell.
  • Looking for a community to discuss ideas with? Shocking The Street features a chat room of like-minded investors sharing investing ideas and strategies. Start your free trial today »

General Electric flood lights. Source: BarronGE flood lights. Source: Barron's

Heading in to Q4 earnings General Electric's (NYSE:GE) credit quality was cause for concern. After downgrading GE's down a few notches from junk status, the rating agencies expressed concern over the diminution of Power Systems. The company also named H. Larry Culp as new CEO. Culp has accelerated asset sales in order to pare debt and appease the rating agencies.

Revenue from core GE (NewCo) - Aviation, Power Systems and Renewable Energy - was $18.6 billion, flat Y/Y. This was an improvement over the high single-digit decline last quarter. Over 35% of NewCo's revenue comes from Power Systems, which remains a laggard.

GE Q4 2018 NewCo Revenue

Orders fell 19% Y/Y as the operating environment for Power continues to deteriorate. Overcapacity in the segment persists, as well as lower demand for equipment. Long-term, the 25 to 30 gigawatt market will drive the Power segment. Management is adjusting to this trend. Revenue fell 25% and will likely fall in 2019 due to waning demand and pricing pressure.

Aviation orders were up 12% and the segment's performance were stellar again. Equipment orders grew 20%, driven by strong momentum of the LEAP engine program. Military equipment orders were up 69%. Aviation revenue was up 21%, and remains the stalwart of NewCo. President Trump has cited a need to beef up military spending, and this could remain a catalyst. At some point, the slowing economy could impact commercial orders or sentiment for the Aviation segment. For now, Aviation remains a star.

Renewable Energy orders were up 19%, driven by onshore wind equipment orders (up 9%) and service orders (up 32%) on strong repower units. Revenue rose 28%, which followed a 15% increase last quarter. The repower backlog is encouraging and the continued disruption of the overall Power segment should drive revenue growth in 2019 and beyond.

This article was written by

Shock Exchange profile picture
The Shock Exchange has a B.A. in economics and MBA from a top 10 business school. He has over 10 years of M&A / corporate finance experience. Currently head the New York Shock Exchange, financial literacy program based in Brooklyn, NY.His book, "Shock Exchange: How Inner-City Kids From Brooklyn Predicted the Great Recession and the Pain Ahead", predicted pain ahead for the U.S. economy and financial markets.In 2014 the law firm of Kirby, McInerney, LLP brought a class action lawsuit against Molycorp, Inc. for "materially misleading statements" in its financial statements. Kirby, McInerney used investigative journalism from the Shock Exchange to buttress its case. That's the discipline the Shock Exchange brings to every situation he covers for SA.

Analyst’s Disclosure: I am/we are short GE. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.