“As long as this sentiment prevails, we don’t think the stock can bottom. Our [price target] remains $6 and looks generous after today’s news,” Tusa said. He is widely regarded as the top GE analyst on Wall Street, gaining a following after his negative call in May 2016.
Tusa estimates, given the negative free cash flow, that GE’s 2019 earnings “has now become close to NEGATIVE” 50 cents a share. His firm previously estimated GE’s earnings would be near positive 50 cents a share this year. Costs from restructuring GE “will be meaningful for several years,” Tusa said, and there “will not be a sliver bullet to a fix.”
“Unlike prior episodes that were based on next year, this seems to stretch into 2021, a whole new level,” Tusa said in his note after the event. Culp told Tusa that the company’s struggling power business will continue to face challenges for “a couple years” longer.
“We are no longer willing to engage in a debate where the Bull case is that Power is “not that bad”, the
stock can be valued on $1+ in [free cash flow], ” Tusa added. “We disagree with the view that it’s ‘not that bad.’”
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