Wall Street is in the state of uncertainty on General Electric (GE), the onetime favored blue chip for long term investors, and is now experiencing an identity crisis and a probable dividend cut.
Major study shops downgraded and innovated the industrial company following its third quarter earnings miss Friday.
Restructuring costs and weak performance struck the firm’s September quarter profits from its power, oil and gas businesses, the first earnings report under the helm of CEO John Flannery, the successor of Jeff Immelt after he stepped down in August.
General Electric’s share ratings were lowered by two firms because of worries about dividend cuts at its November 13 analyst meeting. General electric now has 4.2 percent dividend yield.
GE’s shares decreased 6.3 percent on Monday to end at $22.32 per share after the reports. The largest percentage drop for the stock within six years. Its shares are down 25 percent up to now through Friday against S&P 500’s return at 15 percent.
Coe Nigel, a Morgan Stanley analyst, stated that they see a greater probability of a dividend cut that they do not see as price in. Stanley also added that they suppose investors should take necessary security actions against the possibility of a near term underperformance in the likely occurrence of a dividend cut in November.
Coe reduced GE shares rating from equal weight to underweight. Coe also lessened his price target for the company from $25 to $22.
According to UBS, the company’s 88 percent earnings payout rate for its dividend is possible to decrease. UBS also lowered its rating from buy to neutral and has reduced the price target from $31 to $24.
On the contrary, according to Bank of America Merrill Lynch, all the bad news are now discounted in GE.
As written by analyst Andrew Obin in his not to clients on Monday. “Our analysis indicates that earnings revisions have been the key driver for GE stock over the past decade.” he also added, “we assume that negative revision are bottoming as EPS guide has been properly reset on a multi-year basis going into 11/13 analyst meeting”.
GE was given a raise in rating from neutral to buy with price target of $27.