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General Electric (GE), which is set to report second quarter fiscal 2018 earnings results before the opening bell Friday, has tons of questions to answer. But none are more pressing than this: Has the company reached bottom?
While we can argue that 100-year old company, which has seen its stock get obliterated over the past year (down 60%), has been the victim of bad luck, poor timing and mismanagement, things may soon reverse course. That is, if its strategic review, which includes plans to break up its conglomerate into easier-to-understand pieces, fall into place.
I’ll be the first to say that those are big “ifs.”
But assuming that only half of its strategy is executed according to plan, it’s still possible that GE’s share price has seen the worst of its decline.
That, however, is a long-term issue. While there’s still the embarrassment of getting kicked out of the Dow Jones Industrial Average, which analysts may ask about during Friday’s conference call, the more pressing matter is, — in addition to the safety of the dividend, which was earlier this year cut — will this be the earnings report that finally settle investors’ nerves about the direction of the company?
CEO John Flannery, who earlier this year replaced long-time boss Jeff Immelt, appears to have to solid grasp on the company. At the onset of his tenure, he was quick to identify the company’s weaknesses and challenges. His turnaround efforts are geared towards the company’s strengths such as aviation, power and renewable energy businesses, helping the company to beat earnings expectations in the first quarter, ending a streak of three-straight misses.
For the quarter that ended June, Wall Street expects the Boston, Mass.-based company to earn earn 18 cent per share on revenue of $29.39 billion. This compares to the year-ago quarter when earning were 28 cents per share on $29.56 billion in revenue. For the full year, ending in December, earnings are projected to decline 9.5% to 95 cents per share, while full-year revenue of $121.26 billion would mark decline 0.7% year over year.
With aviation, power and renewable energy businesses being the focus of the company, how GE performs in those segments would go along way in allaying investors’ fear about the company’s direction. The revenue in the Aviation segment is expected to be $7.22 billion, up from $6.80 billion last year, while Power is seen rising 1.86% to $7.10 billion and Renewable Energy’s revenue forecast of $2.15 billion would be down from $2.46 billion last year.
While these numbers aren’t breathtaking, Wall Street is nonetheless eager to see whether this company can jump over these low bars. All told, GE would need a solid beat and confident guidance to give any indication that these unloved shares have bottomed.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
