1 More Reason To Avoid GE
Two months ago I showed you 3 Stocks To Avoid Like The Corona – with one of them being GE.
Today I’m showing you 1 more reason to continue avoiding GE after its 2nd quarter 2020 earnings report came out.
Here’s a brief recap of what I said then about avoiding the stock before we get to today’s article…
If you want to read the full article on why you should avoid Burlington use the link above.
3 Stocks To Avoid Like The Corona – GE
General Electric (GE) used to be a stalwart blue-chip stock.
One that many families over the decades bought, held forever, and never even thought about selling.
But the company founded by Thomas Edison is now a shell of its former self.
In the last few years, it sold off divisions to keep up with the rapidly transforming business landscape. But it hasn’t done this well.
Its yearly revenues fell from $150.2 billion in 2010 to $93.5 billion in the last twelve months. Or a drop of 37.8% in 10 years.
Its operating margin fell from a high of 39.4% in 2011 to only 4.9% now. Or a fall of 87.6% in 9 years.
And its free cash flow production fell from 17.5% of sales in 2010 to only 2.9% in the most recent quarter of 2020.
Plus, GE also cut its dividend from a high of $0.93 per share in 2016 to just $0.04 per share in the most recent quarter.
This is a staggering decline of 95.7% in 4 years.
What’s this led to for GE shareholders in the last decade? Disaster.
If you owned GE shares from January 4th, 2010 to today on June 29th, 2020 your holding would now be down 41.5%… And this includes reinvested dividends.
A $10,000 investment in GE stock in January 2010 is now only worth $5,848… Again, including dividends.
GE was already on a steep decline before the coronavirus hit… But the impacts of the coronavirus look like it could cripple the company.
Stay away from GE stock.
This thesis to avoid GE continued to be proven out when it released its most up to date quarterly financials on July 29th, 2020.
- Total orders were down 38% in the 2nd quarter of 2020 to $13.8 billion from $19 billion in the 2nd quarter of 2019.
- Revenue was down 24% companywide in the 2nd quarter of 2020 to $17.7 billion compared to $23.4 billion in the 2nd quarter of 2019.
- Earnings per share were down in the 2nd quarter of 2020 to negative $0.26 per share from negative $0.01 per share in the 2nd quarter of 2019.
- GE also produced negative $2.1 billion in free cash flow in the 2nd quarter of 2020.
- So far this year its lost $4.3 billion in free cash flow in the six months to the end of this quarter.
- And every single one of GE’s divisions saw revenue fall and was unprofitable on a net income basis in the quarter.
Not good on any account.
As mentioned 2 months ago, GE was in massive trouble then due to its falling revenues, profits, and cash flow while debt levels remained too high.
These are all still the case. And have all gotten worse.
Except for debt levels.
Those fell by $9.1 billion in the last 12 months so far… But GE still has too much debt.
Especially considering that its unprofitable.
These are horrible combinations of things for the company going forward.
And because of them you should still stay away from GE stock.
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Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.