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Mark Yu
Mark Yu
Articles (435)  | Author's Website |

GE Stock Rise Amid $9.5 Billion Loss in 3 Months

The struggling 127-year-old high tech industrial company gains Wall Street admiration

November 05, 2019 | About:

After being accused of ‘Enronesque’ fraud behavior mid-August this year by a renowned accounting expert, General Electric (NYSE:GE) seemed to have shrugged these allegations off and recovered. The company also gained more Wall Street support after its recent quarter’s earnings announcement. As a result, the majority of GE’s short sellers faced a rude awakening after the company’s stock surged to the upside.

For its recent quarter, GE came out beating Wall Street expectations. The industrial firm delivered flat revenue growth and an astounding $9.5 billion loss attributable to the company’s stock holders. The company also managed to provide $0.01 cent per share in stockholder dividends for its recent quarter.

In the past nine months, GE’s largest revenue contributor, its Aviation business, experienced a 3% decline while having generated $4.8 billion in profits. The company’s energy business reported a 23% drop in sales with $84 million in profits. Its renewable business jumped 22%, or $2.2 billion, but delivered $470 million in losses. GE’s healthcare segment reported a 1% sales increase with $2.7 billion in profits, and its GE Capital losses narrowed to $344 million compared to $1.98 billion a year ago.

Despite the hardships in brining profits to the table, GE remains optimistic, as it stated that it had delivered strong organic growth and margin expansion for the period and even raised its free cash flow outlook for 2019.

GE estimates that it will be able to generate somewhere between $0 to $2 billion in free cash flow this year. In review, GE has reported a free cash flow burn or free cash flow of negative $1.56 billion so far this year. That just indicates that for the remaining three months of its fiscal year, GE sees itself generating $1.56 billion net positive free cash flow in order to meet its positive outlook. Wall Street seems to appreciate these results and outlook, as GE’s stock surged post announcement. The company's stock is now up nearly 20% before today's (Tuesday) market opens.

Meanwhile, chaos has swallowed the GE shortville. Short volume on the stock jumped from 3.7 million to 22.5 million in short volume interest as the company was set to release its earnings report. To the bears’ regret, GE’s stock surged as high as 11.5% post company’s news release after beating analyst estimates. The stock has not looked back since.

Recent performance aside, GE remains to have a leveraged balance sheet. Debt or borrowings totaled $95 billion while the company’s equity summed up to $29.2 billion as of the end of September.

Still, GE appears to have surpassed Wall Street’s tough earnings expectations. It has not provided any nasty surprises, and there are minimal signs to date of macroeconomic weakness in its aviation and health-care businesses. At nearly $11 bucks a share and valued at $95 billion despite not having any GAAP earnings this year, GE certainly has met Wall Street expectations and even has beat analysts' target price for next twelve months of $10.70 a share.

Disclosure: No shares in GE.

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About the author:

Mark Yu
I'm a doctor in physical therapy (DPT) with an interest in finance. Not a registered financial analyst. Value seeker. Long only. Global investing. Long-term investing.

I attempt to dissect one company filing every day. I dislike goodwill and intangible assets.

One company (review) a day keeps the speculation (hopefully) away.

"The only source of knowledge is experience."

"I have no special talent. I am only passionately curious." - Albert Einstein

"To strive, to seek, to find, and not to yield." - Alfred, Lord Tennyson

"We find one a year, that's terrific. You do not need a hundred or a thousand great investment ideas to do well. You need a couple. And, the discipline is the most important thing." - Warren Buffett

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