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GE Earnings Fall, But Should You Buy?

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General Electric reported quarterly earnings that topped Wall Street expectations — but its 17 percent drop in revenue was worse than analysts expected. Jack De Gan, CIO of Harbor Advisory, told investors how to approach the stock.

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GE Earnings Reaction

GE has been dragged down by deteriorating profit at its GE Capital arm, which has been hurt by heavy investments in commercial real estate and a weaker credit environment.

“There’s a lot of concern about how [GE’s] assets were being valued,” De Gan told CNBC. “GE Capital doesn’t have to mark almost all of their assets. Also, there’s concern relative to credit quality.”

The company generated $7.1 billion in cash from operations and its backlog of orders held steady at $169 billion.

“It’s positive that GE’s generating cash,” said De Gan. “If things get worse in the economy, it’s good to do the pre-funding and it’s going to be good to generate cash through runoff of the financial balance sheet.”

Overall, De Gan said he is bullish on the stock, long-term.

“We are long-term bulls on this stock, [but] we’re more cautious in the short and intermediate,” he said. “The stock has underperformed in the S&P in the last month or two, so there might be some catch-up due and we’ve seen that thus far this week.”

  • General Electric Revenue Falls Short, Shares Slip

Disclosure:

No immediate information was available for De Gan or his firm.

GE is the parent company of CNBC.

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