Why GE's Stock Rebound Will Fizzle: Miller Tabak

General Electric Co. (GE) was the worst-performing stock in the Dow Jones Industrial average last year. But while it’s already up over 6% this year as of the close of trading on Friday, don’t trust the bounce, warned Matt Maley, equity strategist at Miller Tabak, CNBC’s Trading Nation. Instead, the recent surge is more likely an indication of the stock’s price having bottomed out after the selloff in 2017 than it is a sign of strong company fundamentals, he said.

Between the start of last year and the middle of this past November, shares of GE collapsed 42% before leveling out a bit, finishing the year with a combined 43% drop. While that leveling-out period over the past six weeks may seem to provide a technical support level for the recent jump since the start of the new year, it’s probably better viewed as a result of the stock running out of sellers. The fundamentals don’t support any turnaround for the company as of yet, according Maley.

Despite new CEO John Flannery taking over the reins in August, GE’s Q3 earnings fell far short of the 49 cents per share forecast by analysts surveyed by Thomson Reuters. The company earned just 29 cents per share after taking into account restructuring charges. Following the miss, the company lowered its earnings per share guidance for 2017 from $1.60-$1.70 to $1.05-$1.10, according to a separate article from CNBC.

The company’s power business profits declined as much as 51% from last year’s $1.3 billion to $611 million. Big losses were also reported in GE’s oil and gas business, which saw $353 million profits made during the same time last year turn to a negative $36 million. (To read more, see: GE: Wall Street Doesn’t Expect a Quick Recovery.)

In the weeks following the earnings report, the company announced a much-expected cut to its dividend payouts. The quarterly dividend was cut in half from $0.24 a share to just $0.12 a share, reflecting the cash flow problems plaguing the giant multinational.

Despite net income of $7.09 billion in the most recent trailing 12 months (TTM), GE’s operating cash flow of $5.15 billion was not enough to cover its $7.16 billion of capital expenditures, leaving a deficit of $2.01 billion. Even before making dividend payments, the company would either have to draw down its cash holdings, borrow, or issue more stock to cover the shortfall. (To read more, see: GE’s Shrinking Cash Flow Signals Stock’s Tragic Decline.)

So while the company’s stock may look like a steal of a deal right now because of its low price, without stronger fundamentals, GE might just be “the value trap of the century.”