Bull or Bust

a bull's view

General Electric (GE)

geGeneral Electric
(GE) Earnings Friday

On Friday, October 20, 2017, General Electric will release their latest earnings report before the market opens. Why is this important? Because the new CEO John Flannery is expected to ease concerns surrounding the companies status and future. Everyone will be watching…

Worst Performer of 2017

General Electric is the worst stock in the DOW. It has been the worst performer of 2017 and is really having a hard time with both earnings and public perception. If you like 52-week low’s or stocks that have been beat down this is a perfect choice.

GE stock has tumbled, down more than 25% in 2017, while the DOW has gained over 16% as of October 17, 2017.

Dividend Risk Whispers

The big debate is whether or not GE will be adjusting the dividend and there are many people who are literally petrified of the possibility. Remember, some investors live on dividend income and even though they may be getting pounded on the stock performance they continue to receive regular quarterly dividends and this keeps them in the stock.

If General Electric lowers or, heaven forbid, suspends the dividend you will see an absolute catastrophic event occur on Friday. Every investor who has held strong through the disaster stock performance will finally give up. It will truly be an historic event and I personally do not believe they will touch it. They are smart enough to know what will happen.

Earnings History

GE typically exceeds profit expectations, but has lately failed to gain momentum even as we approach earnings despite beating eight out of the last nine quarters. This could be a good thing…how much further can it tank if it’s already on the floor? Well, as Jim Cramer always says, stocks stop dropping at zero.

Even with a beat, GE has declined on the day of earnings for the last seven quarters. GE is expected to report earnings excluding nonrecurring items of 49 cents per share. This is up 32 cents from the same period a year ago. Revenue is estimated to be $32.54 billion, up from $29.27 billion in the same quarter last year. As you can see there are positive estimates and I believe they will beat, but what happens to the stock on Friday is completely dependent on what is said and how it is presented.

Bullorbust View

So what do I think? I think GE is a buy. Call me crazy, but if it dips to around $20 per share…give me a break! There is intrinsic value in the company. I think Flannery can turn things around and he may wait to provide more detailed information on his plans until the investor meeting which is planned for November 13. Investors may not get good information on Friday which could send it even lower.

My plan is to SELL DEC 20 PUTS on any Friday dip. I currently own Dec 20 and 25 CALLS and I’m upside down (no duh right), but plan to call the Dec 20 CALLS and hold the shares long-term in my primary portfolio. I’m willing to lose my Dec 25 CALL premium completely so I’m holding through earnings and the investor meeting no matter what.

If GE beats on the top and the bottom and they don’t touch the dividend everything will be fine. Be prepared and good luck!

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