It is not necessarily the first name that springs to mind when you think of companies with exposure to the collapsing oil price, but General Electric has spent a considerable amount of time reorganising itself to increase its exposure to the oil market. Subsequently the recent moves in the spot market, created from oversupply and dwindling demand, have begun to affect the company’s revenue.
GE has also spent a considerable amount of time thrashing out an agreement over its acquisition of French company Alstom. Unfortunately historical indiscretions from the French firm will see a sizeable proportion of the anticipated funds paid away to regulators.
The markets are expecting General Electric’s Q4 adjusted earnings per share to rise from $0.38 up to $0.545, and for sales to increase to $42.169 billion up from $37.368 billion. All of this should see the company’s pretax profits jump from $3.915 billion up to $6.105 billion.
Institutional analysts are broadly positive of the company, with 12 buy recommendations, ten holds and none stating a sale. The average 12-month target for the company is $28.92, leaving a $5.30 or 22.5% upside still to be seen.
The current share price is in oversold territory, and even though it is almost 10% below the 50-,100- and 200-day moving averages worries still persist over the company's exposure to oil. Only a change in energy prices would alter our bearish stance.