General Electric Is 2017's Worst DJIA Stock in a Runaway

Industrials

Published: December 30, 2017 9:05 am

Last Updated: January 12, 2020 4:59 am

General Electric Co. (NYSE: GE) shares dropped just 0.1% last week, closing Friday with a gain for the day of about 0.5% and a five-cent decline for the week. On Thursday the stock posted a new 52-week low, a fitting end to the company’s horrible year.

GE had no real challenger as the worst performing equity on the Dow Jones Industrial Average (DJIA) index. For the year to date, the shares have suffered a loss of 44.8%. The second-worst performer for 2017 was International Business Machines Corp. (NYSE: IBM), which lost about 7.6% of its value this year.

GE wrestled away the ranking as the worst performing Dow stock from Verizon Communications Inc. (NYSE: VZ) in late July and has spent the past 24 weeks at the bottom of the DJIA league tables.

The Dow posted an all-time high of 24,876.07 on December 18 and closed the final week of 2017 at 24,719.22. As of Friday, the Dow had increased 24.3% for the year.

The once-most-valuable industrial company in the United States lost that title to Boeing Co. (NYSE: BA) several weeks ago following a tumultuous year when it replaced its long-time CEO Jeff Immelt with John Flannery, chopped its earnings guidance and slashed its dividend.

Flannery has announced that the company will shed assets valued at some $20 billion, possibly including Baker Hughes a GE Company (NYSE: BHGE), for which it paid about $7.5 billion in cash plus 37.5% of BHGE stock. GE would like to get about $14 billion in a sale, but that may be difficult. Before GE bought Baker Hughes, another oilfield services company — Schlumberger Ltd. (NYSE: SLB) — tried to buy the firm but ran into regulatory opposition. That hurdle has probably been knocked over by the Trump administration, but buyers are not likely to be thick on the ground. Also there are restrictions on how soon GE can sell its stake in BHGE that could affect the timing of the company’s total planned asset sales.

Recounting all GE’s problems in 2017 pretty much boils down to, “Will 2018 be any better? How could it be worse?” The company’s trailing 12 month price-earnings (P/E) ratio is 20.39 and the 12-month forward P/E is 17.01, not unusually high, but fairly optimistic given the company’s weak 2017 showing.

The laundry list of the company’s trouble spots is long and the solutions to those troubles reside in Flannery’s ability to execute on his strategy and how the overall equity market shakes out in 2018. A few GE successes along with a strong market could see GE win back some of its lost value.

GE’s shares closed up 0.5% Friday, at $17.45 in a 52-week trading range of $17.25 to $31.84. The consensus 12-month price target on the stock is $21.99, unchanged from last week’s target. The low end of the price target range remained at $15 and the high end remained at $36.

ALSO READ: Boeing Flies High as DJIA’s Top Stock for 2017

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