Quite the fall. Down 60% from its highs a year or two ago.Anybody think the price will get below intrinsic value at some point?Unlike 2008, I imagine the odds of implosion are pretty low, and they do generally make some money.That implies a positive intrinsic value, which implies the existence of a price which represents a margin of safety.In the most superficial possible analysis, earnings estimates seem to be in the buck a share range, so a price around $13ish is a P/E of around $13ish.From the science fiction department, Value Line's 3-5 year price target is $30-40.If that happened, (not a prediction), buyers today would be very happy with 2-3 times their money.On the other hand, the business is in free fall, firing people as fast as they can and not entirely sure what business they'll stay in.Certainly not as bad as HP was, but certainly some existential crisis stuff going on.I'm not biting, but there could be a price at which I would.As a very wild guess, at under $8 it's probably less than a two foot hurdle.At some point maybe Mr Buffett can get out of the bathtub and do a second round of preferred.Does anyone have any great insights?Jim
Some pundits say earnings could fall to $0.50/sh. At PE of 16, that makes $8/sh look appropriate.Looks as if the jet engine business is the star followed by medical equipment. The traditional electrical equipment business seems to have excess capacity and too much staff. Locomotives business is an industry leader (having beaten out GM's EMD business now sold to Caterpillar) but railroads are down a bit with declines in coal (and now oil) shipments. Its for sale as is the gas turbine business.They have been domestic leaders in wind turbines, but competition from China must be stiff. Is that part of electrical equipment?If they trim down to just jet engines and medical equipment, they might be a solid growth company, but corporate overhead would be heavy. So big lay offs would be coming. And what about pension liabilities. Who would take them?
<< At some point maybe Mr. Buffett can get out of the bathtub and do a second round of Preferred >>Instead of getting out of the bathtub I would rather see WEB get in a round of golf with his old buddy Jack Welch.
GE has some under funded reserves in insurance, which need to be funded.....If GE's price gets low enough it becomes a long term option without expiration. Perhaps it could be prudent to pick a price you could live with (sleep at night)and place a limit order. "• As a regulated insurance business, NALH is subject to a statutory accounting framework for establishing reserves that requires the modification of certain assumptions to reflect moderately adverse conditions and other differences from the reserve calculation under GAAP. Under that framework, we estimate that GE Capital will need to contribute approximately $15 billion of capital to NALH over the next seven years. GE Capital plans to make a first capital contribution of approximately $3.5 billion in the first quarter of 2018 and expects to make further contributions of approximately $2 billion per year from 2019 through 2024, subject to ongoing monitoring by NALH’s primary regulator, the Kansas Insurance Department. GE Capital plans to fund the capital contributions with its excess liquidity and other GE Capital portfolio actions and does not expect to make a common share dividend distribution to GE for the foreseeable future."Page 55 from GE 2017 Form 10-K
Less insight, more anecdote: I picked up GE in 2009 during the crash for $10/share... seemed like a brilliant play for many years. Unfortunately, I still have those shares since they are in a taxable account and one really needs to have good ideas to overcome the tax hit of selling big winners.
Looks as if the jet engine business is the star followed by medical equipment. The traditional electrical equipment business seems to have excess capacity and too much staff. Locomotives business is an industry leader (having beaten out GM's EMD business now sold to Caterpillar) but railroads are down a bit with declines in coal (and now oil) shipments. Its for sale as is the gas turbine business.There are two problems with GE, as I see them:(1) Unexpected liabilities. They have pension liabilities, which are somewhat known. They also recently announced unexpected insurance liabilities. Each are big numbers for a challenged company. Any chance of further problems? Pauleckler mentions the possibility of even lower earnings estimates. It seems as though they have had more than one kitchen-sink moment already. I'm not sure they've found all the sinks yet.(2) I am not in love with the core businesses. I am not sure what they are going to sell, and what they are going to keep. After the sales, are they largely going to be in the power generation business? Some of the attractive businesses are on the smaller side and/or being considered for sale.
In the most superficial possible analysis, earnings estimates seem to be in the buck a share range, so a price around $13ish is a P/E of around $13ish. There are analysts who questioned $1 EPS for sometime. The true sustainable earnings may be lower than that.
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |