It has not been a great run for General Electric (NYSE:GE) investors over the past five years as stock prices have dropped from $30.04 per share in August of 2015 to the current price of $6.28 per share in August of 2020 or a loss of nearly 80%. General Electric was once a behemoth in the utilities industry and while it still holds a market cap of just under $55 billion, the company is a far cry from its glory days of the past. The stock price is down over 40% year to date as GE has struggled with the novel coronavirus pandemic that has affected companies globally. But its struggles were evident before the pandemic as well with a near 30% decline in Q1, before the worst of the coronavirus truly struck.
Recently, General Electric has been in the news in regards to their $1.2 billion deal that was made with the Iraqi government. The agreement will see GE work on reinforcing Iraq’s electricity transmission network to connect with neighboring country Jordan, as well as providing gas power to power plants in Iraq. While the political history between the U.S. and Iraq has been shaky, the deal comes on the heels of the first ever official visit from the Iraqi Prime Minister to the White House. GE was not the only American firm to be awarded with Iraqi contracts though as other large-cap companies like Chevron (NYSE:CVX), Honeywell (NYSE:HON), and Baker Hughes (NYSE:BGHE) also received contracts totalling over $8 billion.
How do some of the other arms of General Electric hold up in this current environment though? Its once uber profitable aviation department has had a near 60% decline in revenues year-over-year and has fallen behind their health services as the highest revenue stream for the beleaguered company. CEO H. Lawrence Culp has reassured shareholders that he plans to have General Electric in positive industrial free cash flow by 2021, which would be quite the turnaround. If this is able to happen, we can expect to see a higher price level for the stock within the next year.
So the question remains what should investors do with the stock. To say it cannot get much worse for General Electric is an understatement. Investors who have not yet cut bait are presumably in this for the long haul now and it could be a very long road back to previous levels. In fact, it may be safe to say that the level of success that GE once had may be unattainable for the company for the foreseeable future. If Culp is able to follow through on his guarantee of having GE free cash flow positive by 2021, it would be a tremendous step in the right direction back towards profitability and if he is able to continue to negotiate deals like the one with the Iraqi government, investors should definitely see a rise in the stock price off of the current lows.
Rate this article