What General Electric investors expect from CEO Thursday

NEW YORK (Reuters) – Portfolio manager Michael Kon started buying shares in General Electric Co. about a year ago. This fall, he bought more after GE CEO Larry Culp announced plans to restart the troubled plant.

"I would not say that they have their arms around that," said Kon, who is also director of research at Golub Group LLC, a value-oriented investment company, about the problem d & # 39; diet.

"But at least they have identified all the problems."

Culp has a chance to attract more investors by more clearly explaining GE's strategy when he and other GE executives will present their financial forecasts for 2019 on Thursday.

Wall Street analysts expect GE to earn 70 cents a share this year and generate free cash flow of $ 1.9 billion on average, according to Refinitiv data.

GE's optimists, encouraged by Culp shares, fueled a 53% gain over the stock's low in December. The first underdog at the head of the 127-year-old conglomerate, Culp took a closer look at GE's accounts, upset its board, and dispatched new leaders to troubled areas such as food and insurance.

But Culp still faces many skeptics who dropped out of action while GE had racked up staggering losses of more than $ 30 billion over the past two years and had reduced its dividend to near zero.

The camps are unusually divided: out of 19 analysts who cover the company, nine rate its stock "hold" or "sell hard" while 10 write it "buys" or "strong buyer", according to Refinitiv.

MURKY OUTLOOK

These views have not changed much, even after GE announced a $ 22 billion loss in January or announced to investors last week that its industrial operations would lose money in 2019.

GE's shares are down 15% since the takeover of Culp in October, and their value is less than a third of their value in 2016.

Some analysts believe that the Culp franchise is positive and argue that the cash warning indicates a significant investment in restructuring.

But others say the changes have clouded GE's prospects and want Culp to paint a credible picture of his future.

GE's strategy of selling assets to repay its excessive debt, for example, is abandoning some of its most cash-generating activities, such as rail and biopharmacy, said John Inch, an analyst at Gordon Haskett Research Advisors. GE's genset has cut 12,000 jobs and 30% of premises, but plans to spend more on restructuring this year, he added.

"What exactly are you doing in power with all this restructuring money?" Asked Inch.

GE's forced sales of assets also mean that GE does not get good prices, said Oliver Pursche, senior market strategist at Bruderman Asset Management LLC.

Investors who buy GE shares as cheap are unaware of cash outflows, the uncertainty of strategy, and the fact that GE can not afford to pay a dividend.

"In reality, it is $ 9 for a very good reason," said Pursche, the company sold when GE reduced its dividend in 2017 and that it will not buy until the dividend is income and the prospects are clear.

"Until you get a consistent growth strategy," he said, "there is no compelling reason to invest."