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GE is unlikely to become insolvent, admits long-time bear

Brian Sozzi
Editor-at-Large

GE (GE) is having a good week, so far. But that doesn’t mean all is well at one of Wall Street’s largest industrial show me stories.

But hey, wins are wins nowadays for GE.

A GE spokesperson tells Yahoo Finance the company’s aviation division has booked a solid $50 billion in orders for its engines over two days at the big Paris Air Show this week. That includes two large engine deals: $20 billion with Indigo Airlines and $23 billion with Air Asia.

GE said it booked $31 billion in orders at the 2017 Paris Air Show.

But those dazzling stats are arguably the appetizer for GE’s beleaguered investors, at least from the splashy air show.

GE confirmed its GE Capital Aviation Services (GECAS) landed a deal with Amazon (AMZN) to lease 15 737-800 Boeing cargo aircrafts as the online retail beast pushes more into controlling its own supply chain.

“These new aircrafts create additional capacity for Amazon Air, building on the investment in our Prime Free One-Day program,” said Dave Clark, senior vice president of worldwide operations at Amazon, in a statement. “By 2021, Amazon Air will have a portfolio of 70 aircrafts flying in our dedicated air network.”

“We’re delighted to support Amazon Air’s dedicated air network,” said Richard Greener, GECAS cargo’s senior vice president, in a statement. “The capability of the 737-800 freighter will further Amazon’s ability to provide reliable and regional delivery to its customers for years to come.”

GE shares popped as much as 4% Tuesday on the news.

A General Electric (GE.N) Propulsion Test Platform plane takes off near Victorville, California, U.S. March 28, 2018. REUTERS/Lucy Nicholson

Nothing wrong with GE’s aviation business jumping deeper into bed with a successful, growing company like Amazon. That’s indeed a nice story for GE CEO Larry Culp to pitch on the second quarter earnings call, alongside another discussion of ongoing challenges with industrial cash flow generation and the power business.

The icing on the cake for GE this week? Long-time GE critic and analyst John Inch at Gordon Haskett doesn’t think GE risks insolvency stemming from another round of fall 2018-like credit rating downgrades.

“It’s highly unlikely that would happen [credit rating downgrades leading to insolvency],” Inch said on Yahoo Finance’s The First Trade. “GE has privately said the credit ratings agencies are happy and comfortable with their liquidity plans for the next 18 months. I think that has bought them a lot of breathing room and time.”

Inch points to GE’s asset sales in an effort to raise cash as being positive.

But that doesn’t mean Inch is all systems go on GE’s stock — he still has an Underperform rating on it and a bearish $7 price target. Aside from continued concern on GE’s $100 billion in debt, Inch isn’t sold on the pace of the turnaround happening as quickly (if at all) as some investors think under Culp.

“There are a lot of problems in this [product] portfolio,” says Inch.

Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi

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