Tuesday was a good day for General Electric (NYSE: GE). Today is looking somewhat worse. After rising $0.30 in share price after the company released its fourth-quarter earnings, GE stock has now given back all its gains and a little bit more, and is down 3.4% as we begin the final half hour of trading.
So what happened to GE?
Yesterday, the company reported slightly better-than-expected revenue, but slightly worse-than-expected earnings ($0.08 per share, adjusted). Such "mixed" news might ordinarily not have moved the stock price much, but GE also reported generating twice as much cash as it had promised -- $4.4 billion -- and that got investors very excited that the company's turnaround might be progressing faster than expected.
Image source: Getty Images.
Today, investors seem to be rethinking their optimism about that in the face of a broad market sell-off. But here's the thing:
However nervous investors are about the market in general, and where it might be headed next, General Electric's numbers are already in the books. They're facts. It's a fact that GE has stopped burning cash, and begun generating it instead. And that fact lends credence to GE's prediction that this year, it will generate anywhere from $2.5 billion to $4.5 billion more.
That prediction led one analyst, Morgan Stanley, to raise its price target on GE stock to $13 this morning, calling GE's prediction conservative (i.e., GE might even generate more cash than it's promising). At the same time, GE's underpromising and then overdelivering in Q4 elicited a comment from Citigroup to the effect that there's "growing evidence" that GE is back on track, and able to deliver on its promises.
So long as it keeps doing that, I think GE's stock is going to do just fine -- and I'd go so far as to say GE stock will probably recover its losses of Tuesday in relatively short order.
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