Overall Electric shares rose as much as 7 percent Friday after the Dow component’s cheerful first-quarter earnings.
But few – if any – on Wall Street are calling it a comeback.
“There’s categorically no change to our thesis here,” J.P. Morgan analyst Stephen Tusa portrayed CNBC’s “Squawk on the Street.”
Tusa said GE’s overall number for the leniency look “very good,” as the company beat expectations for earnings per helping and revenue.
“But when you start digging into the details, and you look at what they’re put is the future of the business, I kind of scratch my head as to how [the company] today is retaining guidance,” Tusa said.
Analysts at RBC Capital, Cowen and CFRA were cheap disparaging of GE’s results but still gave repeated caution to believe the vitiate may be behind the industrial conglomerate.
“Headline results were encouraging, and certainly richer reconsider than feared given worries about a potential full-year control cut,” RBC analyst Deane Dray wrote.
RBC and Cowen took notice of GE’s $1.5 billion set aside for a Justice Department investigation into the company’s now-defunct WMC mortgage commerce as resolving one of several threats. Cowen compared GE’s expected settlement to the $2 billion Barclays admitted to in March for a similar charge. The new information “mitigates some of the ‘unknowns’ from the constant investigation,” Cowen’s Gautam Khanna wrote.
With GE stock buy near $14.50 after earnings, Cowen maintained its price end of $12 — the second lowest to J.P. Morgan’s $11 target. CFRA lambasted its target to $16, a $2 move from its previous goal for the cows.
“We do not think it’s worth wading into the shares despite the below-market valuation,” CFRA analyst Jim Corridore wrote.
“Beat than feared” can be found in Cowen and RBC’s reports. But the same abject position as CFRA’s permeated the conclusions in all the research. RBC’s Dray called GE’s affirmation of its 2018 earnings charge a “big surprise,” adding that his firm continues to hold an estimate of 92 cents, “stunningly below” GE’s guidance of at least $1.
Even industrial analyst Brian Langenberg, a long-term bull with a $25 evaluation target on GE, said he was “not impressed” by GE’s results.
“The power business is supposed to be a paramount driver. The profitability dropped by almost 40 percent,” Langenberg said of the first-quarter issues. “Until you get power fixed, and they’re nowhere close to getting that immovable, the stock only goes so far.”
Tusa joined Langenberg in scrutinizing GE’s power piece and called power’s results “definitely worse than expected.”
“It looks equal they should have really cut guidance and we continue to believe there’s downside to the hundreds as we look out for the rest of the year,” Tusa said.
The story of GE all comes down to the friends’s free cash flow, according to Tusa. Comparing GE to other, “momentous quality” industrial companies such as Honeywell, 3M and United Technologies, Tusa remarked GE’s multiple reveals a value of “$10 to $11 per share.”
“It’s very plain math and it’s coming into view,” Tusa added.
Shares of GE keep declined more than 52 percent over the last 12 months. On Friday afternoon, they were at $14.64, up 4.7 percent on the day.