Little more than two years ago, General Electric (GE) stock topped $27, its highest point since the recession. After last Friday’s so-so earnings report, GE stands at … $28.
True, GE’s index, the Dow Jones Industrial Average, is also flat during that time, though the S&P 500 is up more than 4%. But there are plenty of blue-chip stocks whose share prices have swelled nicely despite all the recent market turmoil.
Perhaps the latest GE earnings report offers some insight into why the company seems to be stuck in neutral.
Disturbing Trend for GE Earnings
GE’s fourth-quarter earnings came in 52 cents per share, down from 56 cents in the same quarter a year ago, though they were ahead of the 49 cents analysts were expecting. Sales actually improved year-over-year, coming in at $33.8 billion — well shy of the $35.9 billion analyst estimates, and showing only 1% annual growth. General Electric’s revenues have now failed to rise more than 1% in seven of the last eight quarters.
There are still things to like about General Electric stock. Namely, it pays a dividend that yields a hefty 3.2%, and that payout has doubled in the last five years. At Friday’s earnings call, the company vowed to return another $26 billion in dividends to shareholders in 2016.
Also, earnings per share have grown almost every year since 2009. Granted, things are slowing down now, but GE has attributed the recent earnings slump largely to plummeting oil prices, which has caused a major slowdown in the company’s oil and gas division.
Still, GE — and by extension General Electric stock — feels like a bit of a dinosaur. Oil and gas, light bulbs and refrigerators don’t excite people in today’s digital age. GE rarely makes headline-grabbing splashes the way Apple (AAPL), Google (GOOGL) or Tesla (TSLA) do. That’s okay if your sales and earnings are demonstrating consistent growth. But that hasn’t been the case lately.
So the latest round of disappointing GE earnings are merely an extension of a disturbing trend for this iconic company. Two-plus years of little movement for General Electric stock is a reflection of those tumbling earnings. With no real game-changing or newsworthy products on the horizon, I don’t see GE stock suddenly righting the ship in a substantial way.
General Electric Stock Lacks Spark
In fairness, there have been fits and starts for GE along the way despite no net movement in the stock over the past two years. Less than a month ago, GE topped $31 for the first time in nearly eight years. But the upward move was fleeting, and the quick pullback to $27 shows that it’s unlikely General Electric stock will be returning to its dot-com bubble ($57 in 2000) or pre-recession ($41 in 2007) days anytime soon. In fact, it’s quite possible that GE will never again come close to those glory-day highs.
Though the stock is up a very respectable 18% in the past year, the recent earnings slump doesn’t bode well for the coming year. Even in a broad market turnaround, I don’t see GE matching its 2015 return in 2016.
A year from now, chances are General Electric stock will be at or near the same place it is now and the same place it was in late 2013. Like General Electric as a company, the stock no longer excites.
As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.
