Friday, April 16, 2010

Analyst Reaction: "GE Earnings: ‘Momentum Play for First Time in a Decade’"

From MarketBeat:

GE beat earnings expectations on the bottom line but missed on top line sales numbers. Here are some thoughts from Wall Street analysts, including one who says that Fridays report makes “GE relevant again as a momentum play for first time in a decade.”

  • UBS: “Compared to our model, the ‘beat’ came primarily from Energy (profit +12% [year-over-year], GE Capital (which swung to a pre-tax profit, although taxes were still a benefit), and lower corporate items/eliminations. Sales down 5% [year-over-year] were a bit weaker than expected ($36.6 billion vs. consensus $37.1B), but GE cited acceleration of GE Capital downsizing which we view as a positive.”
  • Deutsche Bank: “In aggregate, we are encouraged by the earlier and sharper than expected decline in [GE Capital] losses and Non-Performing Assets, which can provide significant upside to the GE Capital framework as referenced by management. However, we are surprised by a relatively weak Industrial order performance - down 8% year-over-year (and down 22% quarter-over-quarter) vs. our expectation for 5-10% growth.”
  • Goldman Sachs: “Higher tax expense than expected, with stronger operating results driven by higher Industrial margins and lower GECS credit losses. Orders of $17.1 [billion] were -8% [year-over-year] and could be viewed as a bit light (our expectations were flat), but the improving macro suggests orders will turn later in 2010.”>>>MORE
That last bit "Higher tax expense..." is interesting. As was reported in "General Electric to Boost Research in China" (GE) Hey, that not paying any U.S. federal taxes thing is working!":
How can it be that you pay more to the IRS than General Electric?

As you work on your taxes this month, here's something to raise your hackles: Some of the world's biggest, most profitable corporations enjoy a far lower tax rate than you do--that is, if they pay taxes at all.

The most egregious example is General Electric ( GE - news - people ). Last year the conglomerate generated $10.3 billion in pretax income, but ended up owing nothing to Uncle Sam. In fact, it recorded a tax benefit of $1.1 billion.

Avoiding taxes is nothing new for General Electric. In 2008 its effective tax rate was 5.3%; in 2007 it was 15%. The marginal U.S. corporate rate is 35%....