Tuesday, December 09, 2008


JP Morgan is out with a MAJOR NEGATIVE call on General Electric (NYSE:GE):

- Cutting estimates. 2009 goes to $1.20 from $1.45 (now ~$0.37 below Street), with 2010 to $1.10 from $1.30 (now ~$0.55 below Street).

- Negative: 4Q a miss. The $0.50-0.52 excludes a $1.0-1.4 B after-tax charge, part of which is provisioning (~$600 mm). GE gets a pass on restructuring, but provisions are a part of doing business and inclusion in the number brings us to ~$0.44-0.46.

- Management reaffirmed the dividend, as expected; however, this appears to assume the business trends are steady state or that the company will find other significant sources of cash flow. As per our estimate, we see the potential for the business to decline over next year or two. This means that the company will need to fill a hole with working capital or "other" both sources of cash that we view as unsustainable, assuming that GECS remains as challenged as we think it will Current cash flow estimates indicate that 2009 should be safe (and even if a GECS infusion were to occur, it would still leave $10B cash from the recent equity offering), but we remain cautious on the company’s ability to sustain the dividend in 2010.

Initiates $13 price tgt for GE!

Notablecalls: GE will get whacked, I suspect.


The HardHead said...

Thanks again NC -
Don't ya think it cool JPM gets hammered more than GE at the open.

I think JMP is jumping the gun here and betting GE is going to get whacked similar to Siemens - who announced they were hurt due to cutbacks in China. I don't think this is the case and GE's next report will be the tell-tell sign. I believe China is staying clear of German firms for a while.


The HardHead said...

GE Changes Guidance Policy; Reaffirms Targets (GE)

GE just reconfirmed its December 2 earnings outlook of $0.50 to $0.52 EPS excluding charges and $0.36 to $0.42 including charges); it still sees full-year 2008 earnings of $1.78 to $1.84 EPS from $185 billion in revenue.

I think GE will be solid in 2009. Soon everyone will be taking advantage of the worthless dollar.