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General Electric Company (GEC.L)
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Three Very Revealing Things Yesterday
Reflecting on the results of General Electric yesterday - three things glared positive.
1) Nobody could miss the Free Cash Flow for 2021 was $5.8 billion.
And for 2022 it will be or exceed $6.5 billion.
2) You would be blind if you did not see that Aviation had returned from
$21.6 sales in 2020 to $24.6 sales in 2021
and Aviation profit had gone from $1.3 billion in 2020 to $2.9 billion in 2021
3) Lastly, the reveal that an incredible number of novice investors actually own General Electric.
The fact that the stock dived over $6 a share immediately after results
were announced defies logic.
True it only sold 18 million shares out of 1.1 billion shares outstanding,
but that number was 2.4 times normal volume.
That tells me some part of 18 million shares were held by novice investors and
perhaps short sellers gaming the system.
Real buyers will be back within the month because it is obvious the direction the stock will move.
You could see Culp was also hard pressed on CNBC to handle the stock dive,
and the lousy TUSA comments.
He sidestepped Cramer and Faber's pushes to push back and object to the bad stock day.
Culp took the high road and that was the sign of a true manager and leader.
There is a constant chatter on the GE Yahoo Board.
The quality of comments on this Board shows little investment knowledge.
Comments such as GE is adding more stock progressively every month.
The truth is that all GE is doing is using authorized treasury stock for employee compensation
and that s totally normal.
That sort of comment tells me the person speaking has no idea about
public corporations, stock ownership, and investment.
And it should not surprise me that there is an army of doubters on the
General Electric Yahoo Board.
It should not be news to learn how people get educated on news.
When I see the way the nation gets their daily political information on
what is happening, a third believe that political leaders are filled with conspiracies.
I am guessing that dissemination of investment news is also how
novice investors get their stock knowledge.
Reflecting on the actual General Electric 2021 results - it is clear to me
that Culp is poised to make 2022 incredibly exciting.
The news today that Boeing will increase their Max production from 18 planes
a month to 31 planes a month in late 2022 totally helps GE.
The amount of newly booked orders Ge revealed yesterday in all 4 divisions is also exciting.
Going forward, I do not get the feeling that pricing will be any problem.
Culp said he expected margins to increase 150 points which to a
new investor means 1.5%.
So if that division was making 15% profit - it would now be clearing 16.5% profit.
That is exciting news.
It seems to me some of this Board's posters just plain do not like my putting out
good news and facts.
That is exactly the behavior I would expect from my 7 and 10 year old grandsons -
poor reactive petulant behavior.
It is obvious these shouters are not serious investors.
This is a game board to them.
But it really is NOT A GAME BOARD TO SERIOUS INVESTORS.
For those who do not like GE - just move on.
There is so much more to post about General Electric - but it is just a lot of effort to brush off 20 offensive comments from 20 offensive gamers.
Serious things like a discussion on the newest GE jet engines and how they
fit into the 777 and Dreamliner upcoming planes - that is far more important
than telling me I am a pumper and cheerleader for General Electric.
It matters little to me because I already own a lot of General Electric stock
and am holding - not folding.
Boeing is dragging GE down today
The General Electric engine is the only engine used on the Boeing 787 Dreamliner.
Boeing said today they are still not delivering the 787 Dreamliner planes yet.
So there is an obvious reaction to the lack of delivery dates.
Raytheon stock is also being dragged down $2.62,
Ad Boeing stock is down $12.04
There was also a Wall street Journal front page second section story on GE Earnings.
While I found it was not totally accurate, it certainly was read worldwide.
The only good thing is the volume today at GE is just above 7.3 million shares near the end of the trading session.
As a former GE employee, my biggest regret is holding onto GE stock. Smoke and mirrors... always dangling some hope to make you hold on until the next earnings report. And then the disappointment... year after year after year. The only good news is that GE is a smaller portion of my portfolio now (but that is primarily because it only goes down in value in relation to everything else).
A Little Common Sense is Needed
read the General Electric 8k report filed today - all 20 pages
and listen CAREFULLY to Culp's interview with
Jim Cramer and David Faver today on CNBC
and you will know all you need to know.
Culp said clearly that GE had $5.8 million free cash flow for 2021.
That is a respectable number.
Culp clearly said they have paid down $87 billion in debt in the 3 years.
I do not think there is another company on this planet that has
ever paid $87 billion of debt off in 36 months.
Culp said they have liquid assets of $16 billion cash,
$13 billion in AerCap stock and their note,
and the Baker stock worth at least $8 billion.
All that adds up to $35 billion and he claims current debt is $35 billion.
In my book that is a "wash".
ASSETS = LIABILITIES = ZERO
The AVIATION financials show solid sales of $25.6 billion and profit of $2.9 billion.
It shows a 13.5% markup.
HEALTH shows sales of $1.7 billion and profit of almost $3 billion.
It shows a 16.7% markup.
RENEWABLES numbers are not too good.
$15.7 sales and a loss of ($795) million. a 5.1% loss.
Culp admits there is more needed and it is a bet on the future on climate.
Steel scarcity were the biggest material shortage.
POWER sales were $16.9 billion and a profit of $726 million.
POWER profits offset RENEWABLES - (795) TO $726 million.
The new 20 page single column financial statement is much easier to read -
but I am waiting for the 10Q SEC financial statement to file so I can read the footnotes.
Culp said on TV today GE CAPITAL still has $1.7 billion to pay off in 2022
but that is not an income issue
It is a balance sheet issue.
Insurance was also good. GE INSURANCE earned $40 million.
That was a positive
Yes total Q4 GE sales were down 700 million (3% down)
but Culp said the supply chain issue deferred income
of over $800 million in health alone into 2020.
I do not care if income is transferred back a quarter or two -
it is still there.
FREE CASH FLOW
Cramer asked how confident Culp was with the $6.5 billion FCF in 2022.
Culp shot back he is totally confident and NEVER overestimates FCF.
That shut Cramer up.
Culp projects $7 billion FCF in 2023 but by then HEALTH will be
a stand lone company so that figure is murky.
Steve Tusa "smelled up" the day by saying GE results were
THE WORST QUARTER IN 20 YEARS OF GE REPORTING.
He is crazy.
Has TUSA forgotten the $15 billion Alston surprise write off in 2017?
Doesn't he recall Jeff Immelt buying back tens of billions GE stock above $30 in 2016-17?
How about the $18 billion surprise on GE unfunded insurance liability disclosed in 2018?
What about the ELLS ACTION where GE under reported to stockholders in 2016?
How about the way underfunded pension discovered in 2018?
How about the complete BAKER deal costing GR bout $10 billion?
How about the revelation that GE total debt over $115 billion in 2018 and was making zero profit?
Can anyone tell me anything Culp has done dishonestly?
I cn saw nobody knows of anything dishonest on present GE management.
Now the above giant mistakes are just some of the shockers TUSA forgot.
But a trained monkey on a leash can only dance to the hurly-gurly organ grinder
in the park in a very restrained manner.
TUSA is a bad actor and out to heckle.
He is a bully selling fear and hate.
Once people actually look at what GE accomplished in 2021
and read the financial results - they will come to their senses.
The selloff today will exceed 18 million shares.
But with 1.1 billion shares this is not a lot of selling off.
It is just a knee jerk reaction.
They will all be coming back and buying GE stock.
Give it a while like a week or maybe a month
and then GE stock price may be lot more sane.
Today's report was sensible, enlightening, and far simpler.
I see that Culp and his team re headed in the right direction ad little
they told me today was something to worry about.
Like everyone - I wish it was faster.
With a raging pandemic, inflation, supply shortages, and more-
it will take time.
I am just glad to put 2021 behind me.
I am not an accountant and trying to determine the future impact of Fed rate changes on the GE pension program. Assuming GE has $80B in interest sensitive investments, a 1% increase of Fed rates would increase the pension reserve by $800,000,000 per year. Is this simple approach anywhere close to reality?
A reading of their Q4 results shows:
They made free cash flow for 2021 of $5.1 billion
minus factoring deduction of $1.9 billion - leaving it at $3.9 billion.
It is becoming clearer how they plan to get to $6.5 billion
this year for free cash flow.
2022 free cash flow is a low estimate - but credible.
Most of today's down stock price is emotional and
over time will not stand up.
There was actually nothing in the results negative that could
not be easily attributed to COVID and supply chain issues.
And some caused by government not doing climate change yet.
The General Electric performance generally was positive and showed
and a better tomorrow than today.
That is what investors want - a better tomorrow than today.
I will be looking a lot at the actual figures
but at first look it is positive.
You have to consider the time we are in,
the personality of small investobeing easily spooked,
and the hurry-up attitude of the world which shows impatience.
I think by the summer all this will be clearer and better.
earning beat, margin expansion, $87 Billion debt reduction, 3% less revenues (supply chain, pandemic)
$6 billion FCF 2022 = $110 price target.
> $7 billion FCF in 2023 = $140 price target.
Management is executing well. Thank you Larry!
Culp said this morning
GE has reduced gross debt by approximately $87 billion over three years.
GE has $35 billion of debt,
approximately $16 billion of cash,
and $13 billion3 in the
AerCap equity stake and note
and Baker Hughes equity stake.
That is an absolute positive going forward and
the first time it has been spelled out in short, concise figures.
Even in the most drastic stock market "crashes" - only some of the stocks get destroyed.
If the fundamentals are there - the stock will survive.
Jet engines, MRI machines, Power grid, Wind Turbines are all essentials.
Buffet said it years ago. If you can see it used on Main Street USA - it is great investment.
Gilette, coca cola, insurance, railroads, trucking (McLanes), wholesalers are all part of my life.
Bitcoins are not visible.
So go figure it out.
too many day traders here. I could care less what GE does today or next week or next month. I only care where GRE stock will be 2-3 years from now. GE will be over $200 by then. That is all what is important. How it gets there is not important for me. They are paying down debt and recovery is in progress. Once pandemic is over and aviation picks up and world economy improves after that, that is when real GE growth will start.
2022 free cash flow 5.5 billion to 6 billion and the stock goes down. Are you kidding me??
Like I told @gene a month ago, this stock wont move on good news.
GE will start moving up when they start making large acquisitions.
The rationale is that there are too many people who have negative bias on GE.
They've held the stock for years and have been disappointed by the previous CEOs.
But the Culp era is a new era and people need to pay attention to the balance sheet and not the stock price.
GE is in full turnaround.
GE IS DOING JUST FINE! WILL DO MUCH BETTER THIS YEAR!
GE expects adjusted profit in the range of $2.80 per share to $3.50 per share in 2022, compared with $1.71 per share last year.
Full-year free cash flow is estimated at $5.5 billion-$6.5 billion, up from $2.6 billion in 2021.
You say you have supply chain concerns – which I do not share.
That supply issue is rapidly clearing up.
The lack of inventory simply drives the sales to a quarter later,
so it is not lost revenue – just deferred.
I do have two concerns that are glaring.
The first is that AVIATION was enjoying a 20% profit in 2019.
AVIATION sales were $32 billion and their profit was $6.8 billion.
AVIATION profit is now returning a dismal 5%.
That just plain does not make sense.
Aviation sales this quarter are estimated to be $6.8 billion.
Estimated profits are $435 billion.
At 20% the profits should be around $1.3 billion.
Why the difference?
The same for GE Health.
It was making 15% profit on $20 billion a year ago.
It was making a $3 billion profit.
That has also shrunk dramatically, but less than AVIATION.
HEALTH sales this quarter are estimated to be $5.1 billion.
Profits estimates range from $440 to $600 million.
At 15% a year ago the profits should be around $750 million.
Why the wide difference?
At POWER ($5.5 billion) and RECYCLABLES ($4.3 billion)
combined sales of $9.8 billion.
Are we to believe they are making little to zero return on $10 billion sales.
That defies logic.
So anyone reading the GE figures gets confused.
By any past measure using percentage what GE is making is grossly understated.
The second concern is the reporting of DEBT.
In the Q3 2021 10k financial report they listed it three different amounts
on three different pages and every analyst keeps spouting off numbers
like $60-$80 billion debt reduction..
The actual number is “murky”.
It is totally unclear what the actual debt payoff to date has been.
It is equally unclear where the money came from to pay off debt in the past 24 months.
Biopol was $21 billion.
Aercap was $26 billion.
Selling Baker stock was perhaps$7 billion.
Ending factoring was $4 billion.
All that adds to $58 billion.
That excuses making any profit and is still understated by $2-$22 billion dollars over 24 months.
That also defies logic.
But at the same time GE also spent $1 billion on buying a company.
So where did they get the rest of the money
(about 12 billion by my computation) to pay down debt?
It is all still a mystery.
When financials come out Tuesday for the total year they will be audited.
That should be the best way to get some answers.
Is Culp making more sales and profits at GE than he is telling the world?
He could easily bury that in inventory, receivables, and other areas.
These are legitimate questions.
The numbers simply do not add up.
As long as General Electric lacks decent numbers, the stock price will remain low.
GE beats in EPS and FCF! GE reported a fourth-quarter adjusted profit of 92 cents a share and $3.8 billion in free cash flow from $20.3 billion in sales. Expected was 84 cents in per-share earnings and $3.2 billion in free cash flow from $21.4 billion in sales.
GE made it onto the Barron's published list of the top 27 stocks that it's analysts believe will beat the market in 2022. A very good write up if you have access to Barron's.
Tusa once staked GE's success on its ability to grow cash flow. By this measure, GE is now a screaming buy.
The results are good with minimal variations. CEO, CFO & team committed... high tech products & services. What does GE need? At that point a good Public Relations, who speaks adequately with the market.
good overall result. Not bad considering aviation is down all over the world. GE stock will go up. Do not worry about knee reaction of the market.
"Our dramatic debt
reduction means we can further intensify efforts to strengthen our operations and play offense, setting us up to
deliver between $5.5 to $6.5 billion free cash flow in 2022 and more than $7 billion in 2023. As we lay the groundwork
to create three independent companies focused on critical global needs, we're encouraged by the support from our
customers, employees, and investors. We're confident that our businesses will deliver long-term growth and value.”"
I have a GE fridge that was bought in 1990 ... it is still working and being used in the kitchen. Great company.
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