GE Stock Declining on Possible Headquarters Move After Connecticut Approves Tax Hike

NEW YORK (TheStreet) -- Shares of General Electric (GE) are falling 0.06% to $27.25 on reports that the company may explore moving its headquarters after Connecticut passed a budget that includes $1.2 billion in tax increases for some of the state's biggest corporations, Reuters reported.

On Wednesday, lawmakers approved a $40 billion biannual budget, CNBC.com reported. The budget would increase business taxes by around $500 million over two years, Reuters pointed out. The measures, extend a 20% surcharge on corporate tax, and introduce a tax on group-wide income even if it originates out of state.

CEO Jeff Immelt sent an email yesterday to GE's Connecticut employees saying that he had asked the team to examine the company's options to relocate the headquarters to a state with a "more pro-business environment," according to Reuters. He claimed GE's state taxes have increased five times since 2011.

"I believe we should pay our fair share and that all of us should give back to our communities. But, we can compare Connecticut with other states where small and large businesses have a better environment to thrive and compete," Immelt wrote in the email, CNBC.com noted.

GE currently has about 5,700 employees in Connecticut.

Separately, TheStreet Ratings team rates GENERAL ELECTRIC CO as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate GENERAL ELECTRIC CO (GE) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for GENERAL ELECTRIC CO is rather high; currently it is at 51.25%. It has increased from the same quarter the previous year.
  • Net operating cash flow has increased to $6,090.00 million or 22.75% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 7.69%.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.7%. Since the same quarter one year prior, revenues slightly dropped by 2.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The debt-to-equity ratio is very high at 3.24 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Industrial Conglomerates industry and the overall market, GENERAL ELECTRIC CO's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: GE Ratings Report

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