The bar is incredibly low for General Electric Co. (NYSE: GE) when it reports second-quarter earnings Friday morning. After a seemingly never-ending string of bad news, GE stock may finally be immune to more downside, but analysts say it has limited upside until the company can show a long-term path to growth.
Wall Street analysts are calling for GE to report second-quarter earnings per share of 18 cents. Analysts consensus estimates are also forecasting revenue of $29.25 billion, down 1 percent from a year ago.
In the past year, GE investors have endured one gut punch after another. A string of earnings misses and guidance cuts has been compounded by a 50 percent dividend reduction, multiple credit rating downgrades, a surprise $6.2 billion earnings charge from its finance arm and news of major corporate restructuring. Last month, GE announced it is spinning off the majority of its health care business, divesting its 62.5 percent ownership of Baker Hughes ( BHGE), selling $25 billion in energy and industrial finance assets and further adjusting its dividend payout following its health care spin-off.
[See: 10 Worst S&P Dividend Stocks in the First Half of 2018.]
Looking ahead, GE’s latest plan is to streamline its business and focus on its core power, renewables and aviation segments.
On Friday, second-quarter earnings and revenue numbers will likely take a backseat to updates and clarifications on the restructuring plan.
GE stock is down 48.9 percent in the past year, but analysts say it’s still not a safe bet until it can demonstrate a clear growth trajectory in its core power business.
According to Bank of America analyst Andrew Obin, GE’s aggressive divestiture strategy gives the company much-needed financial flexibility, but the company has a long way to go before the stock is a compelling long-term play.
“The upside to the story is still dependent on the turnaround at GE power, which in our view seems to be far away for now,” Obin says.
Bank of America is predicting EPS and revenue misses of 17 cents and $28.6 billion, respectively, in the second quarter.
Obin says investors should also brace themselves for another aggressive dividend cut by GE.
“GE will reset [its] dividend post-health care exit in the next 12 to 18 months, and we think the cut will likely be at least 60 percent from the current levels to bring the company in-line with comparables’ range,” he says.
[Read: Dividend Cut Reflects Peril of GE Stock.]
Bank of America has a “neutral” rating and $17 price target for GE stock.
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Earnings Preview: What to Expect from GE Stock originally appeared on usnews.com
