Hold General Electric With Confidence as Turnaround Gains Traction

It’s exciting to bear witness to the comeback of an American industrial giant like General Electric (NYSE:GE). Granted, GE stock holders had some rough years, but 2021’s second half could reward those who have been patient.

The General Electric (GE) logo on a building

Source: Sundry Photography / Shutterstock.com

Some folks would say that General Electric lost its way when Jack Welch was the company’s chairman and CEO. However, there’s not much to be gained from pointing fingers now.

Instead, we should look to the present and the future of General Electric. Even after the negative impact of the Covid-19 pandemic, it appears that there’s a turnaround in progress.

The stock’s price action hasn’t been very inspiring during the past several months — but again, patience is the key concept here. Sometimes staying in the trade is the best way to win the investing game, after all.

GE Stock at a Glance

Looking back at it now, we can see how the Covid-19 pandemic came at the worst possible time for General Electric’s stakeholders.

The share price was just starting to curl up to the $100 resistance level. Then, the next thing you know, the entire stock market plunged in March of 2020.

That cut the GE stock price in half for a while. However, in late 2020 and early 2021, the buyers started to show up again.

Here’s where it gets interesting from a technical perspective. From March through mid-August, the General Electric share price clung to that same $100 resistance level like a magnet.

Does this mean that it’s time to just give up and move on to some other stock? Not at all.

As the old saying goes, “The longer the base, the higher in space.” In other words, it’s entirely possible that GE stock is like a coiled spring, building up tension and ready for a huge bounce.

Momentum Is Building

Under the leadership of CEO Larry Culp, General Electric appears to be leaner and better adapted to today’s market conditions. At least, that’s what the company’s stakeholders are hoping.

Culp seems confident, though. Recently, he was quoted as saying, “Momentum is building across our businesses, driven by health care and services overall, with aviation showing early signs of recovery.”

Of course, it’s easy for a company’s CEO to talk about momentum. But are there numbers to back him up on this?

No worries — there are numbers, and they’re quite bullish.

For one thing, General Electric recently raised its full-year free cash flow outlook to a range of $3.5 billion to $5 billion.

If General Electric meets that target, that would mark a major improvement compared to 2020, in which the company only generated $606 million in free cash flow.

Less Is More for General Electric

It might seem ironic that General Electric, which was once famous for manufacturing light bulbs, divested its light bulb business in recent years.

The company also eliminated a biotech unit as well as a majority stake in General Electric’s oil field services business.

Perhaps that’s all part of Culp’s plan, though. It would be hasty to call this plan a resounding success, but General Electric’s less-is-more strategy seems to be getting results, at least in certain respects.

Specifically, General Electric earned 5 cents per share during 2021’s second quarter, whereas Wall Street was only expecting the company to earn 3 cents per share.

Furthermore, the company grew its quarterly revenues by 8.9% to $18.3 billion, while Wall Street analysts projected 2% growth to $18.14 billion.

Most notably, General Electric’s renewed focus on its aviation segment is clearly paying off. For 2021’s second quarter, the company’s aviation revenues increased by 10% to $4.84 billion.

Plus, General Electric’s quarterly aviation-segment orders rose by 47% to $5.5 billion.

The Takeaway on GE Stock

Under Culp’s leadership, a leaner General Electric is on the right track so far. There’s plenty of data to assuage any concerns from investors and affirm their confidence in the company.

Now it’s just a matter of being patient — and holding your shares of GE stock, if you have them.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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Article printed from InvestorPlace Media, https://investorplace.com/2021/08/you-can-confidently-hold-ge-stock-as-turnaround-gains-traction/.

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