GE Earnings Preview: Getting Back in the Groove?
GENERAL ELECTRIC (GE)
Locomotives, media, high finance and medical equipment don't appear to have much in common. But if you know how to manage these businesses properly, they work together quite nicely. Yes, GE is the parent company of this fine network.
Reports Q2 earnings Friday 7/11 at approx. 630a ET. Conference call at 830a ET.
WHAT WILL MOVE THE STOCK:
WHEELIN' AND DEALIN' - What are CEO Jeff Immelt's latest plans for remaking GE ? What's the impact on earnings in the short- and medium term? In May, GE said it was interested in spinning off its Lighting unit. Appliances were added a week later. On Wednesday, GE said it's looking into spinning off its entire Consumer & Industrial group, which includes Appliances, Lighting and Industrial. The Consumer & Industrial division had about $13 billion in sales last year, making up less than 10% of GE's total revenues. Sterne, Agee analyst Nick Heymann says the spin-off will make GE an easier investment to understand as well as an easier company to manage. Over the weekend, GE's NBC Universal (along with Bain Capital and Blackstone) announced they had won the bidding war for the Weather Channel.
FINANCIAL UNITS - Has the credit crisis finally taken a bite out of GE or is GE finding bargains? Consumer Finance makes up 14% of GE's business.
OVERSEAS GROWTH - Don't forget that GE has an amazingly diverse range of products sold around the world. Investors will watch GE's international performance for signs of strength or weakness in the global economy.
REBUILDING CONFIDENCE? - Investors were caught off guard last quarter when GE earnings came in below estimates for the first time in ages. Are analysts worried about another miss? It doesn't look like it. All 14 estimates are either 53 or 54 cents a share and no one has changed their estimates since mid-April. On Monday, Deutsche Bank said it's unlikely GE will post back-to-back earnings disappointments.
GUIDANCE - What is the outlook for Q3? Are there any changes in guidance for all of 2008? If so, what's driving those changes? When Q1 earnings came out, GE said Q2 profits would be between 53 and 55 cents per share and full-year '08 EPS would be $2.20 to $2.30. On May 21st, GE repeated its '08 EPS guidance and said '08 revenues would be about $187 billion.
IS THE FUTURE REALLY THAT BAD? Analysts expect just 5% revenue growth from GE in 2009... at least the earnings forecasts call for an 8% rise. Can Immelt get GE back to double digit growth? How will he do it?
Q2 EPS up 1% to $0.54, revenues up 7% to $45.309 billion
Q3 EPS up 8% to $0.54, revenues up 12% to $47.494 billion
FY 08 EPS up 1% to $2.22, revenues up 9% to $187.448 billion
Source: Thomson Reuters
Year-ago actuals: Q2 EPS $0.53, Rev. $42.316 billion
*All estimates are current as of 7/10 and subject to change.*
PATIENCE REQUIRED - GE shares are not exactly on a winning streak: on June 27, GE closed at a five-year low of $26.26. Since April 1st, GE has fallen about 29% from $38.43. Over the same period, the Dow fell about 12% (from 12654.36) and the S&P 500 is down 9% (from 1370.18). GE is also down 35% from its Oct. 2nd peak of $42.12, which was the stock's highest close in nearly seven years.