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GE responds to JP Morgan price cut as shares plummet: We have 'a sound liquidity position'

Key Points
  • J. P. Morgan lowered its price target on GE to $6 a share on Friday.
  • "GE is a fundamentally strong company with a sound liquidity position," the company said in a statement.
  • Tusa's analysis of GE's balance sheet is "overblown," a company person with deep knowledge of its financial situation told CNBC's Morgan Brennan.
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Trading Nation: GE gets slammed

General Electric responded Friday to questions about the company's financial situation raised by J.P. Morgan analyst Stephen Tusa.

GE said it "is a fundamentally strong company with a sound liquidity position. We are taking aggressive action to strengthen our balance sheet through accelerated deleveraging and position our businesses for success."

Shares of GE closed down 5.7 percent at $8.58 a share in Friday trading. The stock plunged as far as $8.15 a share earlier in the day, hitting the lowest level in nearly a decade.

GE's third-quarter earnings were worse than expected "on almost all fronts," Tusa said in a report Friday, adding that while the company's liquidity issues are "certainly debatable, we believe this is not really about liquidity, it's about a deterioration in run rate fundamentals."

Tusa's analysis of GE's balance sheet is "overblown," a company person with deep knowledge of its financial situation told CNBC's Morgan Brennan. GE's actions to sell off more than $20 billion in assets have provided the company with $10 billion in cash, according to the person. The company has "substantial sources to de-lever," the person told CNBC, through the separation of health care and the sale of its transportation assets.

The J.P. Morgan analyst gave a bleak outlook for GE's future profits. Tusa expects six of GE's eight reporting segments to no longer be profitable by 2020, a sharp drop from when all eight "were profitable even 2 years ago," he said. GE's restructuring is "far from a 'kitchen sink'" situation, where all the company's bad news comes out at once, Tusa said.

He also expressed skepticism about the company's rebuilding efforts. Tusa said GE's third-quarter results "appear to go against the notion that there is 'lots of restructuring' going on here."

"While the stock is down ~70% from the peak of $30, this move still does not sufficiently reflect the fundamental facts, in our view," Tusa said.

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