Shares of Boston-based industrial giant General Electric Co. (GE) are down another 3.4% as of Thursday morning on a bearish note from one team of analysts on the Street who expect the conglomerate's struggling power business to eat into earnings.
In a note to clients on Thursday, JPMorgan analysts cut their price target on shares of GE to $10 from $11, implying 22% downside from current levels, as reported by CNBC. JPMorgan lead analyst Stephen Tusa cited a recent gas turbine failure in Texas as a "negative development for a company that has little wiggle room," in its beaten down power business.
(For more, see also: GE Forced into 'Vicious Cycle' as Power Division Eats at Profits: UBS.)
GE Power Has 'Company-Specific Issues'
Tusa, who rates GE at underweight, trimmed his 2019 earnings per share (EPS) estimate to $0.75 from $0.80, compared to the consensus estimate at $1.04, as reported by The Street. He also slashed his 2020 EPS estimate to $0.82 from $0.92.
"Bottom line, while we give GE some benefit of the doubt in its comments [minimizing the issue], we think the mere occurrence is significant in the context of the state of the story," wrote the JPMorgan analyst.
Tusa expects "weaker results at power and some franchise value impact" for GE, noting that while "the debate an rage around the structural versus cyclical nature of the power industry downturn... there should be no longer any doubt that GE Power has company-specific issues."
Trading at $12.43, GE stock has lost 28.8% year-to-date (YTD), compared to the S&P 500 Index's 9.4% gain and the Dow Jones Industrial Average (DJIA) index's 7.7% increase over the same period. In August, GE stock reached a nine-year low at $11.94.
In June, GE was removed from the Dow after 111 years as part of the blue-chip index, and was replaced by drug store chain Walgreens Boots Alliance Inc. (WBA). Under the leadership of Chief Executive Officer (CEO) John Flannery, the firm has doubled down on streamlining its business, announcing the spinoff of its healthcare vision and the sale of its stake in oil services group Baker Hughes (BHGE) to focus on its power, aviation and renewable energy businesses.