Is the General Electric Company (NYSE: GE) A Viable Long-Term Investment?

January 08, 2018, 08:25 am ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

The General Electric Company (NYSE: GE) had a terrible 2017 having lost about 45.39% of the value of its stock price from its 52-week highs. The company’s problems were significantly accelerated when it reported lower than expected annual EPS estimates during its Q3 earnings call.

Article Summary

GE has lost almost half it stock value in 2017.

The company has new management under CEO John Flannery.

Mr. Flannery is implementing a restructuring plan to revive the conglomerate.

Here’s the trading report on GE.

The company also recently slashed its dividend payout by half, a move which took effect in December, and was negatively received by both shareholders and analysts alike. Other negative news that have plagued GE in the past year include revelations that its former CEO Jeff Immelt had an empty jet trail him whenever he was travelling.

After the grueling year that GE shareholder have had to endure, the question on most investors’ minds is whether the company is a viable long-term investment. Given that the company has new management under the leadership of current CEO John Flannery, GE has a good chance at recovering some of its lost glory.

Mr. Flannery has revealed an ambitious long-term restructuring plan that will see the company divest most of its underperforming business units to focus on a few of its most promising and profitable units. This is a major step for the conglomerate given that it currently operates in numerous business segment that make it extremely challenging for its top management to effectively monitor and grow all business units.

The new CEO intends to divest GE’s lighting and transportation segments, while also selling the company’s stake in Baker Hughes (NYSE: BHGE). Other divestitures will follow as the company intends to remain with only its Aviation, Power and Healthcare business segments. The new management has identified these three segments as having significant growth potential, which could drive the company’s future profitability.

The fact that company insiders are buying GE stock is a positive for shareholders as it indicates that they are confident in the company’s future prospects. Board members including John Flannery, Steven Mollenkopf, Francisco D'Souza and James Tisch all bought GE stock totaling over $56 million in November.

It seems that GE’s future prospects are quite promising given John Flannery’s new restructuring plan, which is likely to generate significant value for company shareholders when completed. However, there is no guarantee that GE will reclaim its past glory given that it is a mature company operating in competitive industries.

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