General Electric Company (NYSE:GE) has spent most of this year simply trying to stop the bleeding.
The former industrial superpower has been decimated amid massive cash flow issues, rising pension obligations, and underperformance within its energy segment. As a result, it’s slashed its dividend in half, jettisoned several business units, and eliminated tens of thousands of jobs.
Despite the bold restructuring moves, analysts at Goldman Sachs remain cautious on the stock through next year. The firm reiterated its Neutral rating on GE recently, preferring to stay on the sidelines despite some evidence that GE’s turnaround plan is working.
Analyst Joe Ritchie continues to look at 2018 as a transitional year for GE, as investors wait and see whether the company can reach its restructuring goals. “On cost-outs, GE is targeting $3B-plus of actions in 2017-18 to generate $2B-plus of net benefits, and we believe it will be critical for GE to demonstrate core margin expansion,” he wrote in a note to clients last week.
It’s still up in the air whether GE’s Power unit can follow through on its “ability to offset end market weakness with cost-outs and show 60% free cash flow conversion in 2018 (vs. negative in 2017) will be a key measure in increasing confidence [and] believability that fundamentals can turn around by 2019-20,” Ritchie said.
In other words, investors are probably better off taking a wait-and-see approach in 2018.
General Electric Company shares closed at $17.71 on Friday, flat on the day. Year-to-date, GE has declined -42.46%, versus a 20.47% rise in the benchmark S&P 500 index during the same period.