General Electric (GE) is set to report Q3 results tomorrow before the market opens with a conference call to follow at 8:30am ET. 

Current Capital IQ consensus stands at EPS of $0.49 on Revenues of $32.51 bln. 

John Flannery's first quarter with the company has been a rough one, at least in terms of share price. A Q2 narrow beat on the top line and $0.03 beat on bottom line adjusted EPS were not enough to support the valuation and shares finished the following session down about 5%.

The bearish case for this stock seems to be very strong. There has been speculation surrounding the possibility of a dividend cut, several top executives have recently decided to leave the company, and broker research firms have painted an overall gloomy picture.

Comparable Industrial Valuations/Dividends:

GE

  • P/E of 26.5x; Adjusted EPS declined 45% 
  • Revenues declined 3.6% 
  • Div yield of 4.2% (there has been speculation pointing to a dividend cut); 1 yr growth of 4.4%

3M (MMM):

  • P/E of 24.9; Adjusted EPS grew 24%
  • Revenues grew 1.9%
  • Div yield of 2.2%; 1 yr growth of 5.9%

Honeywell (HON) 

  • P/E of 22.2x; Adjusted EPS grew 8.4%
  • Revenues grew 0.9% 
  • Div yield of 2.1%; 1 yr growth of 25.2%

United Technologies Corp (UTX):

  • P/E of 18.3x; Adjusted EPS grew 1.6%
  • Revenues grew 2.7%
  • Div yield of 2.4%; 1 yr growth of ~6%

*All Div yields are annualized based on most recent dividend paid; growth rates based on annualized dividend y/y
*Rev and EPS growth/declines based on total revenues and adjusted EPS from 2Q17 vs. 2Q16, respectively.

Analysts:

  • Tgt lowered to $23 from $27 at Goldman after revising EPS/FCF estimates and potential for dividend cut (10/17/2017)
  • Tgt lowered to $20 from $22 at JP Morgan (10/11/2017)
  • Tgt lowered to $21 from $24 at Deutsche Bank; maintain Sell (09/11/2017)

Options Market:

Based on GE options, the current implied volatility stands at ~ 28%, which is 26% higher than historical volatility (over the past 30 days). Based on the October GE $23.5 straddle, the options market is currently pricing in a move of ~4% in either direction by October expiration (Friday).

TECHS: 

Technically, GE is among this years worst-performing stocks as it has been "trend down" for an approximate -28% loss. The burden of proof lies on Buyers to reverse this downtrend, starting with a lift back above its downsloping 50-day ma near the $24-vicinity.