General Electric (GE) - Get Report shares fell on Wednesday as worries continue about CEO Jeff Immelt's strategic vision, how pressure from activist Nelson Peltz's Trian funds will play out and divergent analysis from two major research firms.
On May 15, a Deutsche Bank note suggested the firm will have to cut its dividend in the next couple of years.
"GE's weak cash flow has become worse in recent quarters ... The company appears to be operating relatively 'close to the line' in terms of sufficient cash generation to continue to fund such a robust dividend and share repurchase program," analyst John Inch said.
The performance is likely to strengthen the odds that activist investor Nelson Peltz, who's owned the stock since 2015, may up his efforts to force change at the company. Among other moves, he could try to convince GE's board that a representative from the activist's fund, Trian Fund Management, should get a directorship to help propel a strategy for the industrial giant laid out in a 2015 white paper.
General Electric last cut its dividend during the financial crisis in 2009. Then, it trimmed the payout by 68% in the first such action in 71 years.
On the other side of the argument, Credit Suisse analysts said last week that the firm has a sum-of-parts valuation of $33 per share and confirmed its outperform rating on the stock.
The Swiss bank countered Deutsche Bank's outlook and said the firm is more misunderstood than broken and that now is a good entry point for investors.
While GE is off about 14% year to date analyst Ari Wald said its underperformance doesn't make the Industrial Select Sector SPDR XLI any less attractive.
"Relative to the S&P 500, we expect the Industrials SPDR (XLI) to regain its leadership role given the bullish slope of the ETF's smoothed trend Wald wrote. "With GE, the largest weighting in the sector, acting relatively weak, we think this is another case that underlying market trends are becoming less correlated, and there's greater opportunity in active selection."
GE shares fell 1.6% to $27.51 at midday Wednesday.
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