General Electric shares fall the most in two months on Tuesday, fourth-quarter results to be hit by $6.2 billion insurance portfolio charge

According to a statement by General Electric Co on Tuesday, its fourth-quarter results will be influenced by a $6.2 billion charge related with a decade-old insurance portfolio, which covers long-term health care costs. When adjusted in accordance with the recently-passed US corporate tax rate cut, the charge would increase to $7.5 billion, GE said.

General Electric shares closed lower for a second consecutive trading session on Tuesday. It has also been the steepest daily loss since November 14th. The stock went down 2.93% ($0.55) to $18.21, after touching an intraday low at $17.96, or a price level not seen since January 2nd ($17.53).

In the week ended on January 14th the shares of the industrial conglomerate added 1.19% to their market value compared to a week ago, which marked a second consecutive period of gains.

The stock has pared its advance to 4.36% so far during the current month, following a 4.59% slump in December. The latter has been a tenth consecutive month of losses.

For the entire past year, General Electric shares plunged 44.78% following a 1.44% increase in 2016.

According to General Electric, statutory reserve contributions estimated at almost $15 billion are now expected to be made by the conglomerates unit, GE Capital, over a period of seven years. In order to finance these contributions, GE Capital will have to suspend its dividend towards General Electric Co for the “foreseeable future”.

At GEs shareholder meeting in November, Jamie S. Miller, the companys Senior Vice President and Chief Financial Officer, had noted that the insurance portfolio charge would probably exceed $3 billion. According to Miller, the latter would have been enough to wipe out the entire amount, which GE Capital was to have paid General Electric Co as dividend during the second half of 2017.

The industrial conglomerate has already slashed its planned full-year 2018 dividend to $0.48 per share from $0.96 per share in 2017. It has been the third time, when GE cuts dividend in its 125 years of business history.

“At a time when we are moving forward as a company, a charge of this magnitude from a legacy insurance portfolio in run-off for more than a decade is deeply disappointing”, GEs Chief Executive Officer John Flannery said in a statement yesterday, cited by Reuters.

According to CNN Money, the 14 analysts, offering 12-month forecasts regarding General Electric’s stock price, have a median target of $19.50, with a high estimate of $28.00 and a low estimate of $15.00. The median estimate is a 7.08% surge compared to the closing price of $18.21 on January 16th.

The same media also reported that 8 out of 18 surveyed investment analysts had rated General Electric’s stock as “Hold”, while 7 – as “Buy”. On the other hand, 3 analysts had recommended selling the stock.

Daily and Weekly Pivot Levels

With the help of the Camarilla calculation method, todays levels of importance for the General Electric stock are presented as follows:

R1 – $18.26
R2 – $18.31
R3 (Range Resistance – Sell) – $18.36
R4 (Long Breakout) – $18.51
R5 (Breakout Target 1) – $18.69
R6 (Breakout Target 2) – $18.77

S1 – $18.16
S2 – $18.11
S3 (Range Support – Buy) – $18.06
S4 (Short Breakout) – $17.91
S5 (Breakout Target 1) – $17.73
S6 (Breakout Target 2) – $17.65

By using the traditional method of calculation, the weekly levels of importance for General Electric Company (GE) are presented as follows:

Central Pivot Point – $18.75
R1 – $19.40
R2 – $20.04
R3 – $20.69
R4 – $21.34

S1 – $18.11
S2 – $17.46
S3 – $16.82
S4 – $16.18