General Electric may be double counting up to $18B of assets, says JPMorgan
JPMorgan analyst Stephen Tusa says that after deeper analysis of the company's consolidated financial statements, "there emerges further support" for his view of "how challenged the financial situation" is at General Electric. The company has $100B of net liabilities at present, which after normalizing interest expense, suggests GE is currently generating zero free cash flow into 2019 including Healthcare, and negative $4B including the dividend, Tusa tells investors in a research note titled "Potential Double Counting of Assets Makes Leverage Math More Negative." The analyst thinks investors and rating agencies may be overlooking that a range of $12B-$18B in assets may be "double counted" by GE. "Whether a critical near term liquidity issue or not, this is something that we believe needs to be addressed by new management to move from a low quality levered, financially engineered laggard that we believe deserves a discount, to one that deserves parity, potential actions around which to remedy we see as ultimately dilutive for the equity holder," says Tusa. He keeps an Underweight rating on General Electric with an $18 price target.