Friday, January 22, 2010

General Electric Earnings: Five Analyst Takeaways (GE)

The stock is up 40 cents (2.5%) at $16.42 with the DJIA down 71. As I said in the Jan. 11 post "Schaeffer's "Three Stocks to Watch: General Electric" and "A Year of Living Sideways" (GE)":
Long time readers know that I don't think much of current GE management. The stock is down over 50% since Jeff Immelt took over in 2001. Considering the assets he had to work with the result is pathetic.
That said the action last week was constructive. Here's a threefer...
From MarketBeat:

General Electric’s shares are getting a nice pop, after the company posted a respectable beat of expectations on both the top and bottom lines. Still, its fourth-quarter profit dropped 19% amid a sloppy performance at its NBC Universal media unit. Dow Jones Newswires’ Bob Sechler reports:

The conglomerate posted a fourth-quarter profit of $3.01 billion, or 28 cents a share, down from $3.72 billion, or 35 cents, a year earlier. The company said it took 9 cents of charges, some related to restructuring, that were mostly offset by 6 cents of gains. Revenue dropped 10% to $41.44 billion.

Analysts polled by Thomson Reuters had most recently forecast a 26-cent profit cents on $40.02 billion in revenue. NBC Universal saw a 30% drop in profit drop as revenue fell 4%.

Here are some of the first takes analysts have offered on GE.

Goldman Sachs: 4Q results reinforce the “stabilization” theme that has been building at GE for several months, and we would expect a neutral to slightly positive initial stock reaction to 4Q results. Better-than-expected cash flow, stronger sequential orders, and declining [nonperforming assets] were key “devil in the detail” positives.

Bank of America Merrill Lynch: Within the segments, energy revenues were significantly weaker than our forecast, while aviation, transportation and consumer & industrial were only moderately weaker than our forecast. The enterprise solutions and oil & gas businesses exceeded our top line forecast, while Healthcare and NBCU were largely in-line....MORE

Bloomberg had an interesting article yesterday:

GE Stock May Lag Rivals as Obama’s Finance Rules Loom (Update2)

General Electric Co.’s stock may trail industrial competitors until finance rules being crafted by Congress and President Barack Obama give a clearer sense of who will oversee its shrinking finance unit and at what cost.

“There’s so many questions out there with regards to reform and the wind-down that people are just on hold until that unknown is gone,” said Peter Sorrentino, who helps manage $13.8 billion at Huntington Asset Advisors in Cincinnati, including GE shares and bonds.

GE may say tomorrow that fourth-quarter profit fell, capping a year in which its shares declined 6.6 percent and trailed gains of 30 percent at United Technologies Corp. and 22 percent at Siemens AG. While all are benefiting as orders rise in an economic recovery, investors say GE stock is held back by the prospect it may need more reserves in commercial real estate and by the overhang of pending finance rules in Washington.

A proposal from Obama’s administration last week to charge a fee to large financial companies may cost GE about $400 million in this year’s second half if enacted, analysts including Deutsche Bank AG’s Nigel Coe estimated. The fee plan is in addition to tighter rules now making their way through Congress for all financial companies.

“This proposal amply illustrates the regulatory risks prevalent that include the possibility of more stringent capital and reserve requirements going forward,” Coe wrote.

Today, Obama called for limiting the size and trading activities of financial institutions as a way to reduce risk- taking and prevent another financial crisis.

GE Capital

Chief Executive Officer Jeffrey Immelt is shrinking Fairfield, Connecticut-based GE’s finance arm by writing fewer loans and raising reserves to protect against more potential losses in areas including commercial real estate. He aims for GE to get about 30 percent of profit from finance activities going forward, down from about half in 2008. GE told investors last month losses at the unit should peak in 2010.

GE may say profit from continuing operations fell to 26 cents a share from 36 cents in 2008’s fourth quarter, based on the average estimate from 13 analysts surveyed by Bloomberg.

The company no longer provides per-share forecasts and instead gives analysts what it calls a framework to come up with their own projections. GE Capital said in December the real estate unit has about $7 billion in unrealized losses and forecast a value drop of an additional 13 percent this year....MORE

See also:

Jan. 11: Schaeffer's "Three Stocks to Watch: General Electric" and "A Year of Living Sideways" (GE)

Dec. 11: Wind: "United Tech to Spend $3 Billion on M&A in 2010" (UTX)

Nov. 12: As G.E. Struggles, a Rival Steps Up (GE; UTX)

UTX has dramaically outperformed GE in the last twelve months:
Chart for United Technologies Corp. (UTX)