General Electric Beats Estimates of Q2 2017 & Reaffirms FY17 EPS View

General Electric CompanyEven after beating the Q2 analysts’ estimates of the fiscal year 2017, the stocks of General Electric Company (NYSE: GE) dipped low to hit a 12-month low figure of $25.26. The quarterly earning showed a steep decline of 45% on a Y-O-Y basis, and it was the primary reason for the stock price weakness of this company.

In addition to this, GE has also issued a very poor fiscal 2017 outlook. Still, we hope that the company’s stock will remain bullish in moderate terms for the time being and the reason for the same is discussed below.

The diversified industrial behemoth reported Q2 2017 revenue worth of $29.558 billion which is 12% from the figure of $33.494 billion in the same period last year. The analysts on Wall Street expect revenues worth $29.015 billion during the second quarter.

If we exclude the preferred stock dividends and some other charges, the net income of Q2 2017 stands at $1.185 billion which comes to $0.13 per share. It is lower than $2.756 billion or $0.30 per share as reported in the same period last year.

General Electric

The non-GAAP earnings for Q2 2017 were $2.418 billion. It shows a 48% reduction from $4.684 billion in the same period a year ago. Regarding share, the earning for Q2 2017 were less than $0.51 per share in the corresponding quarter in 2016. However, it is interesting to note that the analysts estimated the share prices to be $0.25.

Regarding segment, renewable energy and power increased 17% and 5% to $2.46 billion and $6.97 billion respectively. However, the gains were marred by a dismal performance by transport and energy connections revenues that declined 14% and 27% to a figure of $1.07 billion and $3.21 billion respectively. The division of Energy Connections provides automation products and electrification to oil and gas, marine, mining and utility industries.

There was a 12$ year on year increase in cash flow from operations to $3.215 billion. Similarly, industrial cash flow from operations after excluding pension plan funding and taxes increased to $1.467 billion from a figure of $65 million in 2016. The company is hopeful that the cash flow will improve for the rest of this year. GE is working to mitigate the industrial structural costs up to $1 billion this year. General Electric has already made a savings of approximately $670 million till now.

The company has affirmed that operational cash flow in fiscal 2017 to be somewhere between 12 to 14 billion dollars. However, GE has stated that full-year adjusted earning is likely to near the bottom of prior guidance of $1.60 to $1.70 per share. The analysts on Wall Street are speculating earnings of $1.62 per share. In the next month, the company would see a change of baton when the present CEO Jeff Immelt will be replaced by John Flannery.

At the moment, the stocks of the company are trading at forwarding PE ratio of 15.9 with the historical average around 19.9. CFRA which is an equity research firm has issued a “hold” rating on the stock with target price of $27.

Hence, considering the earning per share guidance and reconfirmation of the fiscal year 2017 operational cash flow, we expect the stock to remain range-bound and bullish for the short-term period.

If you have a look at the historical price chart, the stock is showing strong support at 25.50. Stochastic Oscillator is also coming out of the bearish zone. In addition to this, there is a gap between 26.57 and 25.99. By these things, we expect the stock prices to rise, and it will cover the difference in a short period.

General Electric Stock Price July 31st 2017

General Electric Stock Price July 31st, 2017

To make a profit from this probable uptrend, it is recommended to invest in a call option. A strike price worth $25.80 is preferred with an expiry period of 1 week.

Rich Archer

Rich Archer

Hi, my name is Rich Archer. I am living in London. Welcome to Binary Manual. Reach to Binary Options broker reviews and market news here.


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