Since December 2016, the S&P 500 has climbed more than 21%, while the Dow Jones Industrial Average is up more than 25%. General Electric Company (NYSE:GE) stock is down nearly 55% during that time. Things just look very bleak for GE stock right now.
Last June, when John Flannery took over as CEO from the embattled Jeff Immelt, it gave longtime General Electric stock holders hope. It has lost more than half its value since.
When General Electric stock went on a little run to start the year, hopping from $17 to $19, investors wondered if GE had finally bottomed. It currently trades at $14, dipping to new 52-week lows at the beginning of March.
That’s not just a trend. It’s a death spiral.
No Signs of Life From GE Stock
Sales have improved in the first two full quarters under Flannery, growing 14% and 2% year over year, respectively. Hasn’t made a difference.
One major problem is that earnings continue to disappoint, falling short of analyst expectations by an average of 23% the last two quarters. Meanwhile, the company is projected to earn less money per share this year than last, which doesn’t inspire a whole lot of confidence about the company’s future growth.
Despite the low earnings expectations and plummeting share price, the General Electric stock price today isn’t overly cheap, trading at more than 13 times forward earnings estimates—more expensive than Apple Inc. (NASDAQ:AAPL), General Motors Company (NYSE:GM) or Target Corp. (NYSE:TGT). And those stocks are up an average of 19% in the last year.
The problem with General Electric is that the company no longer seems to know what it is. It wants to be an industrial conglomerate with a focus on tech, but it’s more known for things like aviation, oil and gas and healthcare. In essence, GE has become the proverbial “jack of all trades, master of none.”
You can blame that on Immelt. After all, in Immelt’s nearly 16 years at the helm, GE stock lost roughly a third of its value, at a time when the Dow Jones Industrial Average more than doubled. Sixteen years of that kind of drastic under-performance is a difficult trend to reverse, even with a change at the top.
Flannery has said all the right things since taking over, vowing improved focus on customers and better execution on cash and margins. Part of his plan to improve focus, it appears, is downsizing. The company plans to “significantly reduce” corporate staff in an effort to cut $2 billion in costs by the end of 2018.
To date, none of Flannery’s initiatives has slowed the year-plus slide in GE stock. Cost-cutting is a pragmatic and responsible approach. But it’s not sexy. It’s not the type of thing that excites investors.
Lack of Excitement Dooming GE
And that’s why no one is buying GE stock. Sales growth, cost cutting and a change at the top are the equivalents of shuffling the deck chairs on the Titanic. They can’t save a sinking ship.
To me, the die has been cast on General Electric stock for quite some time. It’s not coming back, at least not more than the occasional mini-run of a few dollars.
In a way, the world has passed General Electric by. Now, so are investors.
As of this writing, Chris Fraley did not a position in any of the aforementioned securities.