Skip to Content
US Videos

Disastrous Results as Expected for GE

Shares of the stock are nearing 5-star territory, where we would be buyers.

Mentioned:

Joshua Aguilar: As expected, GE reported disastrous third-quarter results today. Even so, we anticipated the firm would disclose a kitchen sink of bad news. The stock is flirting with 5-star territory as the price of the stock has dropped below $10. If the stock drops down to our 5-star price, at just above the midpoint between $9 and $10 per share, we would be buyers of the stock. At that price, investors would be paying for what we believe are GE's wide-moat businesses in aviation and healthcare, which cumulatively have an enterprise value of about $160 billion, could attach all of GE's foreseeable liabilities, and get the remaining portions of the business for free. Note, these businesses alone are worth more than GE's current enterprise value, and GE has the benefit of having separate market values for both oil and gas, as well as transportation. Bottom line, we’re hoping Mr. Market beats down this stock to our 5-star price so investors can enter the stock at what we believe is an attractive price point.

The firm did cut its quarterly dividend, as expected, to a penny per share from 12 cents per share previously. While the cut is unfortunate, this was also something we anticipated and built into our model. Year to date, the company has paid out $3.3 billion in dividends but has only generated industrial free cash flow of negative $335 million. If anything, what we did not expect was that GE would preserve any remaining portion of its dividend, as we would have preferred the dividend being cut in its entirety. Danaher, which Culp ran from 2000 to 2014 only paid about a 3% to 4% dividend payout ratio, and we think Culp will use the cash to delever the balance sheet, as well as reinvest in the remaining businesses.

Joshua Aguilar does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.