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Market Eager To Hear From GE, Economic Bellwether

GE, the parent of CNBC, is scheduled to report its second-quarter financial results Friday, July 17, before the market opens. What do you need to know?

Following is the earnings preview as provided by CNBC’s news partner the Associated Press.

OVERVIEW: GE is often considered a bellwether of the U.S. economy, and for good reason. It is a manufacturing behemoth, producing jet engines, power plant equipment, oil field parts, medical diagnostic machines and consumer household appliances.

The Fairfield, Conn-based conglomerate also has a large financial unit, GE Capital, which provides lending for credit cards, home mortgages, and commercial real estate.

Both GE's industrial side and GE Capital have struggled during the current recession and financial crisis. GE's manufacturing businesses have been hurt by the global drop in demand in sectors such as aviation. GE Capital saw its profits slip away as more borrowers defaulted on loans and credit became harder to get.

GE has tried to preserve cash by slashing its dividend and raising funds from outside investors. In recent months, company officials have said the credit markets have strengthened somewhat. Company CEO Jeff Immelt said in May that GE had already issued $45 billion in debt it planned for this year and has pre-funded $7 billion of its debt target for next year.

GE is also focusing on areas of the economy that are expected to benefit from U.S. and global stimulus plans, such as wind energy and health care. The company plans to offer no interest loans to medical providers to cover the cost of implementing GE's electronic medical records management system until federal stimulus money comes through.

But concerns linger over how well GE will fare for the rest of the year, especially GE Capital. The commercial real estate market continues to sour, which could be trouble for the unit's large portfolio of loans and holdings in office buildings. Investors will also scrutinize GE's sales of jet engines and train locomotives to take the pulse of the battered transportation industry.

Finally, GE has been fending off speculation about the impact of President Barack Obama's financial sector reform proposal. The proposals could give regulators more sway over GE Capital and potentially GE as a whole. That could force GE to spin off GE Capital, though GE has said it remains committed to the finance unit.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect quarterly earnings of 23 cents per share on revenue of $42.16 billion. GE no longer gives quarterly earnings guidance.

In the second quarter of 2008, GE earned $5.07 billion, or 51 cents per share on revenue of $46.89 billion.

ANALYST TAKE: Analysts expect that GE will report lower revenues in its industrial businesses. GE Capital could eke out a small profit, but far smaller than a year ago. Some analysts warn that GE's NBC Universal entertainment division could post weaker results because of the soft advertising market.

Nigel Coe of Deutsche Bank expects earnings of 25 cents per share, but predicted that industrial earnings could fall 20 percent while GE Capital profits could drop 80 percent year-over-year.

William Blair & Co. analyst Jeffrey Germanotta said investors will likely focus on issues that include GE Capital's future, weakness in commercial real estate and whether GE Capital has enough loan loss reserves.

Find out what Ragen Mackenzie analyst Peter Jacobs said to Fast Money and get all the trades. Watch the video now!

STOCK PERFORMANCE: GE's shares recovered somewhat during the quarter from a sharp slide during the first few months of the year. The company's stock opened at $10.17 on April 1 and rose as high as $14.53 on May 8 before dipping again to end the quarter at $11.72 on June 30. That represents a gain of roughly 5 percent during the three-month period. By comparison, the 30-stock Dow Jones Index, which includes GE, was up around 15 percent.

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Trader disclosure: On July 16th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (BAC), (FXI), (GE) Seygem Asset Management Owns (NOK) Calls; Finerman's Firm Owns (WMT), (MSFT), (NOK); Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM), (XRT)

Finerman's Firm And Finerman Own (BAC) Preferred Shares, Finerman Owns (BAC); Finerman's Firm And Finerman Own (WFC) Preferred Shares, Finerman's Firm Is Short (WFC); Pete Najarian Owns (YHOO) Call Spread; Pete Najarian Owns (INTC) Calls, (IBM) Calls; Jon Najarian Owns (AGU), (IPI); Terranova Owns (TER), (MSFT), (RIMM), (INTC), (SUN), (FTO); Terranova Owns (CCE) Calls

GE Is The Parent Company Of CNBC

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