General Electric (GE) Bear Case Does Not End In A Liquidity Crisis - Deutsche Bank

November 30, 2018 6:53 AM EST
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Price: $13.30 +0.68%

Rating Summary:
    13 Buy, 13 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 38 | Down: 18 | New: 7
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Deutsche Bank analyst, Nicole DeBlase, reiterated her Hold rating on shares of General Electric (NYSE: GE) and cut her PT to $7 from $11 and laid out what she considers to be a realistic bear case for the company. In short, she believes investors are concerned about the trajectory of GE Industrial FCF and whether the company is headed for a liquidity crisis but that in a worst case scenario, there will not be that crisis.

The analyst stated "We have built up a detailed segment-by-segment bear case earnings model, which assumes continued declines at Power and modest downturns in Renewables, Aviation and O&G. We also assume a maximum cash outflow from contract assets and progress payments of $3bn and $2bn p.a., respectively, and that accounts receivable continue to increase as GE Capital is unwound and the Healthcare spin is consummated. These assumptions get us to $0.21/share cash burn in 2019e, $0.58/share in 2020e and $0.14 in 2021e, after accounting for lost cash flow of expected asset disposals. The good news is that even in this drastic scenario,
we do not foresee a liquidity crisis; the GE Industrial cash balance (ex-overseas cash) would end 2021e at $5bn, in line with 3Q18 levels".

For an analyst ratings summary and ratings history on General Electric click here. For more ratings news on General Electric click here.

Shares of General Electric closed at $7.65 yesterday.

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