In a research note this morning, Barclays analyst Julian Mitchell told investors he does not see the push-back of General Electric’s (GE) earnings date to October 30 from October 25 as a negative, as he believes it increases the likelihood of the company’s new CEO will be able to provide more thorough “forward looks,” rather than “simply discuss historical financial results.”
NEW Q3 RELEASE DATE: General Electric announced on Friday that it has moved the date of its third quarter earnings release and webcast to October 30 from October 25 to allow new chairman and CEO Larry Culp to complete his initial business reviews and site visits following his appointment on October 1.
NOT A NEGATIVE: Commenting on the announcement, Barclays’ Mitchell told investors that he thinks the push-back of the earnings date increases the likelihood that Larry Culp will be able to provide more thorough “forward looks” and initial thoughts, rather than “simply discuss historical financial results.” While he acknowledged that the news likely creates selling pressure, the analyst does not view the push-back as negative. Since the CEO change and his rating upgrade to Overweight on October 8, Mitchell has discussed General Electric with more than 70 institutions. Many arguments he hears are variations on two themes, namely that many of GE’s assets are in fact liabilities and that Power has a very bleak future, forever. Given the complexities of the GE balance sheet, and the “shocking” magnitude of the company’s mis-calculations, the analyst believes concerns over its assets are “understandable.” However, Mitchell has seen many examples where a company’s net debt/EV calculations become “swollen by unwanted guests” when the share price is under pressure, and these visitors somehow disappear from calculations once conditions improve. Regarding Power, while acknowledging that it is “not thriving,” he questions how much downside is really left “after $7B of EBIT has evaporated, free cash is very negative, a $20B write down has been announced, and potentially one third of the headcount could be cut.” Overall, timing the share price impact of a reset is extremely difficult, he contended, noting that everyone he speaks to expects a huge dividend cut and an equity raise. While Mitchell sees this potentially creating “a wave of selling pressure,” he pointed out that it may prove short-lived. The analyst reiterated an Overweight rating and $16 price target on GE shares.
