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What Investors Could Expect from General Electric in 2Q17

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What Investors Could Expect from General Electric in 2Q17 PART 1 OF 5

How General Electric Has Trended in 2Q17

General Electric’s new CEO

US industrial behemoth General Electric (GE) will announce its 2Q17 earnings on July 21, 2017. GE’s hunt for a new CEO ended in June 2017. John Flannery will replace Jeff Immelt as CEO effective August 1, 2017. For more details, read Will a Change of Guard Boost GE Stock?

Just a few days before the CEO change announcement, Jeff Immelt said the company would have to incur additional cost cuts to meet its 2018 estimated earnings of $2 per share. The weak oil and gas market, along with difficulties in equipment pricing, is expected to impact GE’s earnings in 2018. The market perception of GE changed dramatically. On July 10, GE traded at its 52-week low of $25.80 per share.

How General Electric Has Trended in 2Q17

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GE’s stock performance

As shown in the above graph, General Electric has underperformed its peer group in the last year. GE stock returned -18% to shareowners. In contrast, industrial peers have fetched positive returns for investors:

  • United Technologies (UTX): 17.4%
  • The 3M Company (MMM): 17%
  • Illinois Tool Works (ITW): 31%
  • Honeywell International (HON): 14.8%
  • Parker-Hannifin (PH): 45%
  • Boeing (BA): 58.5%

The SPDR S&P 500 ETF (SPY) returned 13.8% during the same period. This ETF has a 3.3% exposure to oil and gas exploration and production companies, and a ~3% exposure to electric utilities.

Management’s insights

At an annual gathering of industry executives, GE CEO Jeff Immelt stressed the company’s increased focus on cost cutting. GE anticipates cutting $2.0 billion in structural costs. Plus, the company is aiming for a 1% expansion in operating margins. The company aims to achieve this expansion with more focus on digital and additive manufacturing such as 3D printing.

In this short pre-2Q17 earnings release series, we’ll look at analysts’ estimates for GE’s future revenue and margins. In the end, we’ll review analysts’ recommendations for GE and its peers.

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