General Electric: Steppin' In The Right Direction

Aug. 05, 2019 4:30 PM ETGeneral Electric Company (GE)16 Comments
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  • General Electric reported solid Q2 2019 results, but the stock finished the week lower by ~5%.
  • The company beat bottom-line estimates and management raised their full-year 2019 guidance for EPS and cash flows.
  • I plan to remain long General Electric.
  • This idea was discussed in more depth with members of my private investing community, Going Long With W.G.. Start your free trial today »

On July 31, 2019, General Electric (NYSE:GE) reported what I would call solid Q2 2019 operating results, but the stock remained under pressure due in large part to overall market concerns (i.e., the trade war shenanigans and the Federal Reserve's jumbled communication on future interest rate expectations). However, GE shares are still outperforming the broader market by a wide margin so far in 2019.

ChartData by YCharts

But, yes, GE shares are still down big over the last 1-, 3- and 5-year periods. While the company still has a long way to go, Mr. Larry Culp, CEO, already has General Electric heading in the right direction, and the Q2 2019 results were, in my opinion, another step forward for this industrial conglomerate.

The Results, Steppin' In The Right Direction

On July 31, 2019, General Electric reported adjusted Q2 2019 EPS of $0.17 (beat by $0.05) on revenue of $28.8B (in line with estimates).

Source: Q2 2019 Earnings Presentation

The highlights:

  • Organic industrial revenue and orders were up 7% and 4%, respectively. Additionally, the Q2 2019 backlog came in at almost $400B (up 11%).
  • Adjusted industrial cash flow was -$1B, but this number was at the high end of management's prior guidance.
  • Management raised their full-year EPS and cash flow guidance (more on this below).

There was a lot to like about General Electric's Q2 2019 results (too much to cover in one article), even after factoring in the 737 Max concerns and the goodwill impairment for Grid Solutions. In this recent article, I explained to the Seeking Alpha community that there were 2 metrics (margins and financial leverage) that investors will need to pay close attention to throughout the current year.

For margins, the company's Q2 2019 operating results were less than impressive.

Three months ended June 30 Six

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This article was written by

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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, WAB, 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.

Additional disclosure: Additional disclosure: This article is not a recommendation to buy or sell any stock mentioned. These are only my personal opinions. Every investor must do his/her own due diligence before making any investment decision.

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