How dare they challenge the CFO math!
https://www.bloomberg.com/news/articles/2018-06-27/ge-fails-to-win-over-wall-street-as-plan-falls-well-short
Goldman Sachs, Joe Ritchie
(Neutral, price target $14)
“Deleveraging much needed but tough to see upside value.”
“The steps outlined are effectively the equivalent of swapping out debt for equity and would be dilutive to existing shareholders from an EPS/FCF standpoint once completed.”
“We were negatively surprised by the announcement of a $3 billion contribution to equity capital by the parent through 2019. Against this backdrop, even with reduced risks to GE’s credit worthiness, we see few fundamental factors for outperformance given the dilution and uncertainties associated with Power/GE Capital.”
JPMorgan, Stephen Tusa
(Underweight, price target $11)
“This is not a full reset and de-risk, we see it as more financially engineered value created on the back of intangible opinions/assumptions, avoiding headlines like ‘GE cuts dividend’ or ‘GE raises equity.”’
“There is actually little new deleveraging here for the enterprise, as we are not sure how an incremental ~$5 billion of net industrial cash brought can turn into $60 billion, and therefore this plan falls well short of what we view as a number to truly derisk/provide optionality.”
“The dividend is likely to be cut meaningfully, headline announcement or not.”
“While the management pitch is that they don’t need BHGE cash, we don’t see how that’s possible with this backdrop and we now assume they use it for purposes other than the shareholder.”