GE Up As Citigroup Foresees Meaningful Turnaround

GE Up As Citigroup Foresees Meaningful Turnaround
September 6, 2019

 

The shares of General Electric (NYSE: GE) has appreciated for the past two trading sessions after Citi analyst Andrew Kaplowitz issued an optimistic report about the company’s future while reiterating his “buy” rating. Notably, Kaplowitz is the third analyst in a row to speak positively about GE after forensic accountant and whistleblower Harry Markopolos accused the company of $38 billion accounting fraud.

Kaplowitz, after a meeting with the GE CEO Larry Culp, stated that he is upbeat about GE’s reversal prospects. While acknowledging that GE is still not entirely out of risk, Kaplowitz noted that GE’s short-term goals of industrial free cash flow of plus or minus $1 billion and EPS in the range of $0.55 to $0.65 are attainable.

The analyst points out that the company’s primary objective is to minimize risk to its balance sheet and streamline its business. He believes that investors may be undermining the progress made by GE in achieving these goals, despite worries over the ongoing US-China trade war. Kaplowitz highlighted improvements in main business divisions, in addition to better focus on management of the company.

In a note to clients, Kaplowitz said “Longer-term, GE’s runway for improving results in 2020 and beyond could be more significant than we think some investors appreciate given what appears to be an increasing focus on fundamental changes to operational and management practices that could drive better and more consistent results over time.”

Earlier this week, two more analysts brushed away a mid-August report by Markopolos accusing the industrial giant of accounting fraud. In his 175-page document, Markopolos cautioned investors of accounting fraud “bigger than Enron and WorldCom combined.” However, Deutsche Bank analyst Nicole DeBlase and Wolfe Research analyst Nigel Coe dismissed the claims. DeBlase opined that Markopolos report is not convincing and “poorly reasoned.” Coe stated that the report “marks the apogee of the GE bear case.” Once again after going through the long-term-care insurance reserves of GE, Coe was convinced that “the reserves are well-grounded and certainly not fraudulent.” In short, both analysts have categorically stated that Markopolos report does not convince of any cash balance or insurance reserve fraud.

Furthermore, on Tuesday, Danaher Corporation (NYSE: DHR) priced a €6.25 billion senior notes offering to fund the takeover of GE’s biopharma business. Gordon Haskett analyst John Inch opined that acquisition of GE’s biopharma business by Danaher does not raise any doubts. However, he cautioned that it shouldn’t be construed as a bullish catalyst for the stock of GE.

Haskett said, “GE seems to pop on any headline – that isn’t a healthy trading pattern. The deal was never in question, in my opinion – Danaher is buying BioPharma for a below-market valuation.”

Dismissal of fraud accusations negates a potential overhang for the stock of GE. Danaher news is also positive. The optimism of management is likely to soothe investors who had seen multiple earnings misses and guidance cuts. As a result, we can expect the stock to remain bullish in the short-term.

Technically, the stock has found support at 8 levels. The Chaikin money flow indicator is also in the positive region. As a result, we can expect the stock to appreciate further in the short-term.

GE - technical analysis - 6th Sept 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Ian Maguire

Ian Maguire

Ian is our resident contributor to the latest going ons in the cryptomarket, keeping up to date with the latest icos and coins


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