Patience may pay off for General Electric traders

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General Electric has undergone major restructuring and changes in senior management which has sent its share price down, but some analysts feel this is the right time to make a long-term investment

Many analysts expect General Electric (GE) to exceed profit expectations when they post their Q3 earnings report on October 20. After all, it has done in eight of the last nine quarters. However, there is also an expectation that its share price will fall as it has done following the release of the last seven earnings results. 

Fears over a dividend cut have eased since last week which would have led to an investor exodus and a serious drop in share value. However, there still seems to be a lot of work to do for recently appointed CEO John Flannery who is overseeing restructuring efforts.

“A dividend cut could crush the stock as retail investors flee, but maintaining it gives GE little or no excess cash to grow,” Jeffrey Sprague, an analyst at Vertical Research Partners, said last week. “GE has continued to shrink the company but it has not proportionally shrunk the dividend.” 

Moody’s Investors Service credit analyst Rene Lipsch told Reuters that GE’s options would narrow next year when it no longer receives billions from asset sales at GE Capital. Adding that, long term, the dividend “depends on Flannery’s ability to increase cash flow from the businesses.”


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