General Electric: Change Is (Finally) In The Air

Feb. 04, 2019 3:44 PM ETGeneral Electric Company (GE)55 Comments
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WG Investment Research


  • General Electric reported mixed Q4 and full-year 2018 results but the stock finished the week higher by ~10%.
  • Management was able to win over the market with their candor and, as it relates to GE's future state, I believe that change is finally in the air.
  • I am long GE and have no plans to sell any shares, even after the recent run-up.
  • This idea was discussed in more depth with members of my private investing community, Going Long With W.G.. Get started today »

General Electric (NYSE:GE) reported what I would consider mixed Q4 and Full-year 2018 operating results but the stock finished the week higher by over 10 percentage points.

ChartData by YCharts

GE shares reached the double-digit mark for the first time since October 2018, but I believe that the recent stock performance is only the beginning of a multi-year recovery (let me stress the word "year"). The Q4 2018 operating results, in my mind, were okay (at best) but I believe that the stock shot up in short order due to the fact that Mr. Larry Culp, CEO, was able to eliminate a great of uncertainty while showing the market that [real] change is in the air.


The Latest, Change Is In The Air

On January 31, 2019, GE reported Q4 2018 operating results that beat the top-line estimate ($33.3B vs $32.2B) but that missed the consensus earnings per share estimate (adjusted EPS of $0.17 vs $0.22). On a full-year basis, the company saw its top-line increase by 3% while its operating profit fell by 12%.

Source: Q4 and Full-year Earnings Press Release

Given the company's current state, those metrics sound good, right? However, as shown, it is the 'other things' that have plagued this once great company. The additional pension contributions and the insurance reserve charges were well-known but the goodwill impairments wrecked major havoc in 2018.

The company's quarterly results were already covered in great detail here on Seeking Alpha (see here and here) so I will not bore you by going over the same facts. Instead, I will focus on what caused the stock to jump - that is, the reality that Mr. Culp and team are focused on real change.

To me, the most interesting/meaningful/impactful slide in the deck was the summary of Mr. Culp's observations.

ChartData by YCharts

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, 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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