General Electric Company (GE) Stock Has Limited Upside in 2018
General Electric Company (NYSE: GE) investors may be more excited to start fresh in 2018 after GE was one of the 10 worst-performing stocks in the Standard & Poor's 500 index in 2017. Unfortunately, it may take at least one more year for GE stock to turn over a new leaf.
Last year was disastrous by just about any measure for GE. The company consistently missed earnings targets, aggressively cut 2018 guidance numbers and slashed its dividend by 50 percent. As a result, the stock endured a parade of analyst downgrades and a credit cut by Moody's Investor Service. General Electric stock tumbled 45 percent on the year.
In November, General Electric CEO John Flannery announced the company would be restructuring its business, selling off non-core assets and focusing exclusively on its aviation, power and health care segments.
[See: 7 of the Best Stocks to Buy for 2018.]
Tigress Financial analyst Ivan Feinseth says GE investors have reason for optimism, but they should keep expectations tempered in the near-term. Feinseth says at the least, GE shareholders should not have to endure more downside in 2018. In addition, he says the restructuring plan and the dividend cut represent the correct long-term strategy as GE looks to shore up its balance sheet and maximize profits.
"However, we believe it will take some time for the company to start to generate positive business performance trends," Feinseth says.
GE management said at its shareholder meeting in November that the company is not concerned about near-term share price performance, and Feinseth says shareholders should expect 2018 to be a transition year.
"We remain on the sidelines until business performance starts to improve or new catalysts emerge that will drive future shareholder value creation," he says.
Following the dividend cut in November, CFRA director of industrials equity research Jim Corridore said GE's transitional period could extend far beyond 2018.
"I'm not seeing a lot of extreme value here, though certainly it's a little more value than it was a couple days ago," Corridore says, according to CBNC. "Not only is 2018 a reset year, but 2019 and beyond, they're talking about 2 to 4 percent organic growth."
[See: 7 of the Best Blue-Chip Stocks to Buy for 2018.]
CFRA has a "hold" rating for General Electric, and Tigress Financial has a "neutral" rating for GE stock.
Wayne Duggan is a freelance investment strategy reporter with a focus on energy and emerging market stocks. He has a degree in brain and cognitive sciences from the Massachusetts Institute of Technology and specializes in the psychological challenges of investing. He is a senior financial market reporter for Benzinga and has contributed financial market analysis to Motley Fool, Seeking Alpha and InvestorPlace. He is also the author of the book "Beating Wall Street With Common Sense," which focuses on the practical strategies he has used to outperform the stock market. You can follow him on Twitter @DugganSense, check out his latest content at tradingcommonsense.com or email him at wpd@tradingcommonsense.com.
