Things keep going from bad to worse for General Electric Company (NYSE: GE) investors. Just days after the company cut its dividend by 50 percent and issued lackluster 2018 guidance, credit rating agency Moody’s Investor Service cut GE’s long-term debt rating from A1 to A2 because of concerns about the direction its energy business is headed.
“The downgrades reflect the severe deterioration in the financial performance of GE’s Power segment that will last through at least 2019,” Moody’s senior credit officer Rene Lipsch says in the downgrade note.
Along with the dividend cut, General Electric announced this week that it will be completely restructuring its business to focus on its aviation, power and heath care segments. CEO John Flannery said the company will be looking to exit other businesses, including its majority ownership in oil services company Baker Hughes (BHGE).
Unfortunately for GE stock, Lipsch says the company will not be able to sell its way out of its current hole. “Moody’s does not anticipate that GE will allocate a meaningful portion of any proceeds from planned asset disposals to debt reduction in the near term to help expedite the restoration of its credit metrics,” he said.
The good news for GE investors is that Moody’s A2 credit rating is still considered a medium-level, investment-grade rating and is unlikely to inhibit the company’s ability to secure financing. It is also unlikely to drive potential investors away. Ratings agencies Standard & Poor’s and Fitch both have AA- ratings for GE debt, but both agencies have warned of possible downgrades.
GE stock initially traded down 0.5 percent on Thursday following the downgrade, after plummeting 7.1 percent on Monday and another 5.8 percent on Tuesday in the wake of the dividend cut news.
Despite GE stock being down more than 42 percent year-to-date, CFRA director of industrials equity research Jim Corridore says GE is still nothing to get excited about from a value perspective.
“I’m not seeing a lot of extreme value here, though certainly it’s a little more value than it was a couple days ago,” Corridore said this week, according to CBNC.
“Not only is 2018 a reset year, but 2019 and beyond, they’re talking…
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