General Electric Stock: Is There Any Hope?

General Electric (NYSE:GE) is in the limelight after the company announced exit from new build coal power market and to increase focus on renewable energy, sustainable energy and power generation business. Even though the stock fell on the company’s plans, overall, the move would turn out to be positive for the company. Eventually all energy companies will have to make a choice: either stick to the same-old unsustainable energy sources or evolve and adhere to the new environment-friendly, cost-effective and affordable solutions.

CEO Remarks

General Electric saw a big rally on September 16 when the company’s CEO Larry Culp gave some upbeat remarks about the company’s future. The executive sees the company becoming free cash flow positive in the second half of half of 2020. He also sees strong cash position for the company in 2021.

Culp also said that General Electric is seeing “good progress” on its $2 billion cost-cutting plan and $3 billion in cash savings initiatives.

What Went Wrong?

General Electric has been though terrible times. The stock that was trading at $30 in 2017 is now hovering around $6. The company’s performance was battered due to the coronavirus pandemic. Its aviation business suffered the most as flights around the world came to a halt. But analysts believe that the stock is very cheap and presents an opportunity, as movement is starting to come back to normal levels and the company is executing its turnaround strategy.

Turnaround Efforts

General Electric leadership’s notable effort was to sell the company’s biopharma unit for $21 billion. The company is also lightening its debt load. Most of its debt is fully offset by cash on hand and earning assets held at its GE Capital finance subsidiary.

GE Aviation's revenue is bound to come back to normal because commercial flights around the world will immediately start normalizing once the coronavirus cases come under control. That’s only a matter of time. Some of the most conservative estimates suggest that air travel would be back to normal by 2023. GE’s aviation business for military is also on a growth trajectory, with estimated revenue to touch $8.3 billion by 2025. Airlines globally will continue to use GE’s services for engine maintenance even in the midst of the pandemic.

Therefore, for long-term investors, GE stock could be a good option. The company still has a long way to go before it regains its glory.