Still hugely profitable
GE is still a massively profitable company, though it’s not so profitable as it should be. My guess is that GE’s 2017 revenues (including the purchase of Baker Hughes) will come in at $127.5 billion, a few billion dollars higher than last year’s revenues. However, GE’s 2017 earnings will probably come in at $1.05 a share, and that’s a lot lower than last year’s $1.55. GE’s revenues for 2018 may come in between $128 billion and $135 billion, and share earnings could be between $1.04 and $1.15. And I guestimate that GE’s operating margins and net profit margins will suffer in the next two to three years. Flannery believes that there could be $3 billion in cost savings; however, others think the amount could be closer to $8 billion. Flannery will be selling assets that are not key to GE’s major businesses and eliminating the numerous personal fiefdoms that resisted change. He hopes to generate over $7 billion in new cash flow and reduce long-term debt by 20 percent. And GE’s 301,000 employees may decline to 268,000.
The dividend has been cut by 50 percent, enabling GE to increase its cash balance by $4 billion. Buy another 250 shares, and hold your nose for a couple of years.