Industrials

General Electric Logs Another Week as DJIA's Worst Stock of 2017

Paul Ausick

Published: July 29, 2017 9:10 am

Last Updated: January 12, 2020 9:38 am

Shares of General Electric Co. (NYSE: GE) continued their slide last week, losing about 1.5% on top of the 2.9% the stock lost in the prior week after a disappointing second-quarter earnings report. GE’s year-to-date share price decline is now 19.21%, the worst performance of any of the Dow Jones Industrial Average’s (DJIA) 30 components.

Last week marks GE’s second consecutive visit to the bottom of the DJIA rankings. Long-time worst stock, Verizon Communications Inc. (NYSE: VZ) reported earnings last week and showed growth in subscriber numbers. That led to a weekly gain of 3.8% in the stock price.

GE’s headaches center around three issues: free cash flow, a weak forecast for sales in its Power segment, and remaining weakness in the oil and gas sector.

In the second quarter, the company posted $1.5 billion in free cash flow (cash flow from operations minus capital spending), mostly offsetting a negative free cash flow of $1.6 billion in the first quarter.

But the company has forecast free cash flow of $12 billion to $14 billion for the year — and it’s still in the hole with the year half over. GE is guiding to the bottom of that range.

Orders for electricity generating power turbines were expected to be lower this year, and the company now sees a softer market in 2018 as well.

Sales of equipment and services in the oil and gas sector have improved, with equipment orders up 12% in the second quarter. Service orders, however, were down 6%, and the company’s chief financial officer said the market remains challenging as customers appear unwilling to commit large capital spending sums.

GE’s shares closed down 1% Friday to $25.53, in a 52-week range of $25.26 to $32.38. The consensus 12-month price target for the stock is $28.27.