Universal Electric has been “brushing things under the rug and leveraging aggressive accounting” for a number of decades, Deutsche Bank analyst John Inch told CNBC on Thursday.
“One could draw the prior management basically did this to drive the … adjusted EPS [earnings per allocate] up as much as possible to pay themselves as much as possible,” he said in an interview with “Power Lunch.”
The Embankment Street Journal reported Wednesday that former GE boss Jeff Immelt was day by day overoptimistic, projecting results for the company’s future mismatched with Aristotelianism entelechy.
A spokesperson for Immelt disagreed with the basis for the Journal report, effectual CNBC that “the story ignores the facts and events of the past 16 years.”
Inch clouted there are “a lot of parties that are culpable here.”
“The information they yielded was one-sided. They made it overly complicated to dissect the financials. They compounded the inscrutability on purpose so people wouldn’t look at the details,” he added. “Now unfortunately they’re pay off a bit of a price for it.”
A GE spokesperson told CNBC, “Mr. Inch’s assertion is factually fallacious. As we’ve said, we follow rigorous accounting practices, in line with GAAP guidelines. Any disclosure or suggestion otherwise is false and misleading.”
Shares of GE have been on a spiralling slide, dropping 40 percent since Immelt stepped down in October.
Bulk the problems plaguing the company is a collapse in cash flow and a severely abbreviated profit outlook, Inch said. He also thinks the dividend, which was cut in half in November, is at gamble of being slashed again.
“We could be facing a multiyear power [siring industry] downturn when just less than a year ago the attendance was going full throttle, talking about how great everything was. And today the exactly looks completely different,” he said.
Inch, who has a sell rating on GE and a $13 reward target, also thinks the notion of a GE breakup was put out as a “deflection” from the band’s “fairly serious challenges.”
CNBC reported last month that the associates is aiming to announce a decision on breaking up its businesses as early as this cause to occur, according to sources. A split is likely, the sources said.
“The reality is GE cannot off. It’s on the hook to back 100 percent of GE’s Capital’s bonds. It has over $30 billion of underfunded debit,” he said.
On top of that, the Securities and Exchange Commission is investigating the company’s accounting and the Right Department is probing GE’s ownership of a subprime mortgage company it owned first the financial crisis, Inch added
“You can’t just separate the company. You’d give birth to to refinance $150 billion of bonds plus untold incalculable burden. It’s just not going to work. It’s a nice narrative. It’s just not possible.”
A spokesperson for Immelt did not this instant respond to a request for comment on Inch’s remarks.
— CNBC’s Michael Sheetz play a parted to this report.
Disclosures: GE is an investment banking client of Deutsche Bank. Deutsche Bank and/or its affiliate(s) has acquired non-investment-banking-related compensation from GE within the past year.
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