General Electric (Ticker Symbol: GE) announced earlier this week that it is going to freeze pension plans for roughly 20,000 of its employees here in the United States as an attempt to get its debt in order and get the company back on track. The American multinational conglomerate is making an attempt to reduce its debt by up to $4 to $6 billion. The company said that it will also freeze some pension benefits for roughly 700 executives as well — all who became executives before 2011.
Larry Culp, General Electric’s Chief Executive Officer, has done a number of things to help get the company financially sound. He lowered the companies dividend down to a penny and has helped the company raise cash to help decrease its debt. Mr. Culp said that the freeze will become effective on January 1st, 2021 and should help reduce debt by billions of dollars.
This comes on the heels of a solid quarterly earnings report from last quarter. General Electric reported an earnings per share beat of .17 cents per share vs. Wall Street analysts’ estimates of .12 cents per share. Additionally, General Electric reported a revenue beat of $28.83 billion vs. Wall Street analysts’ expectations of $28.68 billion. The company also raised its 2019 earnings forecast from .50 to .60 cents per share to .55 to .65 cents per share.
The above image is a long-term weekly chart showing the past decade of General Electric’s stock. The stock was hit hard during the great recession and dove from the $40.00 price level all the way down to roughly the $5.00 price level over the course of just over a year. The stock put in its first extremely oversold condition in its Relative Strength Index in over six years. GE’s stock started to come back to life in 2009 led by the government’s quantitative easing program. The stock slowly began to creep higher, breaking above its downtrend and trading above both its 100- and 200-week moving averages.
General Electric proceeded to trade higher until 2016 before finding some price resistance around the $32.00 price level. GE’s stock put in a top shortly after that while forming a bearish divergence pattern, where the stock makes a higher high in price but the Relative Strength Index makes a lower high (as indicated on the chart by the red lines). Traders and investors sometimes look at divergences for a possible pause within the current trend, which can at times, lead to a reversal, as occurred in GE’s case. Unfortunately for shareholders the stock has continued to trade lower and has yet to find solid footing. Currently, GE is trading below both its 100- and 200-week moving averages.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 14 analysts offering 12-month price targets, the average price target for General Electric’s stock is $10.59. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $9.03.
Investors in the space should look to GE’s next earnings release on October 30th for fresh news within the company.