Assorted Electric’s turnaround plan will require the company to cut its quarterly dividend again if it is thriving to reduce risk and position itself for new growth, J.P. Morgan analyst Stephen Tusa intended in a note Monday.
The industrial conglomerate needs “$30 billion in coin of the realm” to pay off enough of its debt to match expectations from ratings agencies, Tusa said. GE already cut its dividend in half most recent year, from 24 cents per share. CEO John Flannery discretion not comment to analysts at an industry conference on May 23 about whether the friends would cut the dividend in 2019. He said GE will “have to see how this put ons out.”
“We expect to learn a lot more about the ‘change’ agenda soon,” Tusa communicated. He said he believes Flannery’s team “still has the benefit of a clean slate” to lay a underpinning for the future. Tusa added a caveat that there is “little wiggle apartment,” as he said he doubts “investors will be patient in [the second half of 2018] if the gaps don’t go GE’s way.”
“The bottom line is that we see the need to de-risk substantially, which groups the need for cash and a cut to the dividend to help with operational de-levering,” the analyst minimized.
GE shares were down 1.3 percent Monday afternoon while the S&P 500 commence.
J.P. Morgan holds the lowest price target on Wall Street for GE’s supply at $11 per share. Tusa has steadily cut his price target, citing exuberant risk and Flannery’s 2018 earnings forecast of $1 per share as not “credible” because it does not embody restructuring costs. After GE’s first-quarter earnings in April, Tusa said there was “assuredly no change” to the firm’s thesis, despite an overall number that was control superiors than expected.
GE continues to be the worst performer among the components of the Dow Jones industrial common, down more than 49 percent over the last 12 months. The next worst, Procter & Punt back, is down just over 16 percent.
The current situation “is not set to correct quickly under the current plan,” Tusa said. He thinks “the term is right” for Flannery to present “a new long-term plan, as long as it’s achievable and unprogressive.”
GE may start by “monetizing” Baker Hughes GE, an oilfield services company that J.P Morgan guesstimates would bring in “around $20 billion,” Tusa said.
“But it devise still leave the need for another $10 billion in debt reduction to get to ratings operations’ targets, which we consider a ‘minimum,'” Tusa said.
While Tusa may be enduring the most pessimistic view of GE’s stock, other analysts gave recapitulated caution after GE’s first quarter that the worst may not yet be behind the industrial conglomerate. Cowen slit its price target in April, to $12 from $15 for GE shares, racket it a “show me” stock. Analyst Gautam Khanna wrote at the time that Cowen “does not put ones trust in the 48 cents per year dividend is safe” until GE can turn catch obligations into cash “on a net basis” or its beleaguered power business “repercussions sharply and soon.”
As a whole, Tusa said GE must begin “beat iting communications to the investor community clearer.” He said Flannery’s team disseminated data in a way that was “disjointed and difficult to verify on many accounts.” Flannery is maintaining to be turning a new page at GE but “selectively telling just some aspects of the facts” is a habit “similar to the past,” Tusa said.