Count JPMorgan analyst Steve Tusa as one of the doubters about Wednesday morning’s early buoyancy over General Electric Co. (NYSE: GE). In a note to clients cited by Barron’s, Tuva said, “The stock is up on the headlines, as it has been many times before, but, like in the past, the underlying core fundamentals are actually a bit worse.”

GE stock is up about 40% for the year to date, although that’s below its highest point (up 50%) in late February. Shares lost half of that 50% gain following a presentation in early March by CEO Larry Culp that painted a fairly dismal picture of the company’s free cash flow for the current year in its Industrial segment.

The shares recovered quickly, however, and by mid-March had sucked back 15 points of the earlier dip. But as Tuva noted, the headlines moved shares higher while fundamentals weren’t improving significantly.

In 2018, Power segment revenues dropped 22%, and the unit’s net loss totaled $808 million on revenues of $27.3 billion. In this year’s first quarter, Power revenues dropped by 22% to $5.66 billion, and in the second quarter, revenues slipped by another 22% to $4.92 billion. Chances that GE will match last year’s Power revenues are likely out the window for this year. In 2017, Power segment revenues reached $34.88 billion.

Why focus on Power? Because that’s where, until recently, GE made its nut. The $13.7 billion acquisition of Alstom and a later impairment charge of $22 billion (noncash) related to that acquisition is a good starting point. The deal closed in November 2015, with former CEO Jeff Immelt calling it “another significant step in GE’s transformation.” He was right about that at least.

GE had made a massive bet on demand for new fossil-fuel-burning power plants. What GE failed to do was include in the equation the ever-falling price of both wind and solar energy. At the time GE made its offer for Alstom, the unsubsidized levelized cost of energy (LCOE) from wind power was $59 per megawatt-hour (MWh) and the unsubsidized LCOE from solar power was $79 per MWh. In 2018, wind’s LCOE had dropped to $42 and solar’s to $43.

LCOE is the average revenue per unit of electricity generated that would be required to recover the costs of building and operating a generating plant over an assumed financial life and duty cycle. According to a recent estimate from the U.S. Energy Information Administration, the LCOE of a power generation plant entering service in 2023 is $40.20 per MWh for advanced combined-cycle natural gas plants, $36.60 per MWh for onshore wind and $37.60 per MWh for solar photovoltaic. Fossil-fuels, even natural gas, are economic losers.

To draw a line under that point, GE announced in June that it was closing its Inland Empire natural gas-fired power plant at the end of this year, 20 years ahead of what would be the expected life cycle of such a plant.

Then, doubling down on its bet on fossil fuels, GE paid $30 billion in 2017 for a controlling stake in oil and gas services company Baker Hughes, a portion of which GE later sold at a discount of about two-thirds to its purchase price. When the deal closed, Immelt called it “a smart deal for our combined customers, shareholders, and employees.” Not so much, truth be told.

GE’s (and Culp’s) problem is how to get out from under the weight of all those essentially declining fossil-fuel assets and products. Worldwide demand for natural gas-driven turbines with a generating capacity of more than 100 megawatts dropped from 249 in 2011 to 110 in 2018. GE captured just 42 of those turbine sales last year.

Even its newest turbines had a blade problem late last year that resulted in unexpected shutdowns and added costs to GE for the repairs.

Cutting expenses and raising margins in the Power segment sounds like something GE ought to be able to do. After all, it has decades of experience selling massive electric power plants. But the ground is shifting as more and more alternative energy projects are approved. The Los Angeles Department of Water and Power announced earlier this month that its Eland solar project will generate 200 megawatts of power for just under two cents per kilowatt-hour and store 800MWh in batteries for just 1.3 cents per kilowatt-hour. Natural gas-fired turbines are now an uncompetitive outdated product, of which GE has an ample and probably growing supply.

GE’s stock was up more than 3% in the premarket and down more than 3% later during the trading session. Shares have climbed back to a slight increase of 0.3%. Shares hit an intraday high of $10.79 and a low of $10.05, after closing at $10.52 on Tuesday. Investors appear to be having a hard time deciding who and what to believe. Can’t blame them, really.

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