General Electric Co. (NYSE: GE) reported very strong earnings last week of $0.44 per share, versus $0.40 for the same quarter last year. This company is so large and so diverse that it has been compared to herding cats. So many moving parts and somewhat dependent on global growth as opposed to just United States growth. CEO Jeffrey Immelt has stated the goal to grow earnings at 2-3 times the global GDP -- that's global!!
General Electric's stock price is sitting right at the mid-point of its 52-week range. At Friday's closing price of $35.38, it's $3 above the 52-week low, and $3 above the 52-week high. If GE continues to maintain double-digit percentage earnings growth, investors will begin to chase the shares back up to the high side of the 52-week range. Immelt has pressured his multiple businesses to perform and perform now.
General Electric is focused more on building existing businesses rather than expanding through acquisitions or joint ventures. GE will focus this year and next on the lucrative finance units. GE Capital is the goose that lays the golden egg; it's predictable and fairly high margin. Also, GE Capital and its subsidiaries are global in reach and scope. The commercial finance division is making a strategic and profitable acquisition in Japan. It's all about the margins.
GE pays a healthy and handsome dividend of $1.12, representing a 3.2% current yield. Investors look to GE for its current yield, but if GE can maintain a steady 10% growth rate for revenues and earnings, the shares will only accelerate from here.
Many institutional investors think GE is a bit undervalued at this price level, due to the expected margins gains from GE focuses on the capital lending business. They are probably correct and GE is a buy here for conservative growth accounts.
Georges Yared is the CIO of Yared Investment Research.
Will Rich Ross really have a positive impact on Disney's movie operations?
Consumers sick of recession, may spend extra on holidays
Corrections, seasonality and Santa Claus
Reader Comments (Page 1 of 1)
4-16-2007 @ 2:56PM
Bruce E Warnock said...
We are retired folks and have held GE for many years. Sadly, we remember its stock at $60 in 2000 and if it is still a "growth" stock, it has a long way to go just to return to its glory days.
What is the reason Wall Street has gone so sour on GE, as we have all along thought it was a wonderful company.
4-16-2007 @ 4:55PM
Jerry Dooley said...
I have held GE for about 3 years. Should they break out some of their units so it can become a more manageable company?
4-16-2007 @ 6:21PM
FLETCHER PHELAN said...
ONE HAS TO BE PATIENT WITH GE, AS IT IS SUCH A HUGE COMPANY, WHICH IS SIMILAR TO A VERY LARGE CRUDE CARRIER (VLCC)--DIFFICULT TO STEER. I EXPECT IT TO DOUBLE FROM CURRENT PRICE WITHIN TWO YEARS.
4-17-2007 @ 10:30AM
francis foley said...
How much of the GE assets will be directed toward alternative energy.It has been made public that they will be assigning assets to the development of wind energy.
4-17-2007 @ 12:03AM
robin said...
Immmelt, you need to get more involved in NBC
and Universal. I am so tired of reruns on NBC especially on Saturday night. If I were PG or any other company I would not give advertising money for reruns. Your stock price should be so high, not in the $30's. You are too diversifed which is good and the stock should move up in price. I can't understand why it is so low. I have held this stock for years.Lets get it moving again.
You pay to much for executives at NBC AND UNIVERSAL. CUT BACK AND LETS SEE A PROFIT WITHIN THESE TWO DIVISIONS.
4-17-2007 @ 10:24PM
Frank said...
WoW,GE is a great company...I bought shares years ago...With long term views,I have faith in the company...
4-18-2007 @ 5:10AM
Frank J Wasneuski said...
Lot of faith in the company
4-18-2007 @ 11:11AM
Joel said...
Bruce: GE is one of the most widely held institutional investments. Many portfolios include GE in their top 5 holdings. Unfortunately it hasn't moved much in 5-6 years and investors tire of seeing it sit there without any progress. On any uptrend they sell, knocking the price back down again. It's a great company but a lousy stock to own if you're looking for a capital gain.
4-18-2007 @ 11:20AM
jerryh said...
what is wrong with this stock?? the market goes up over 100 points and this stock drops in value.
does the board of direcrors have any concern for stock holders??
do they need to pay a bigger dividen??
their ceo does not seem to care about stock holders.
4-18-2007 @ 11:25AM
jerryh said...
bruce
why would you own this stock if you were not looking for capital gain???
4-18-2007 @ 4:00PM
Bob Owen said...
I have owned GE for over ten years.The stock has gone through two splits. One split was a two for one and the other three for one.My thinking was for long term future retirement. Though it has been hanging in the mid 30's range for several years, I feel good things are to come for investers who hang in there.GE is a good well managed company and has a good repor with most of the large stock brokers.
4-18-2007 @ 7:38PM
A. Kosmetatos said...
Until the press stops pandering and explains that GE has under preformed the S&P significantly for almost 5 years and is in trouble and that the board of directors needs to replace Mr. Imelt in the same way Nardelli was at Home Depot nothing will happen and 5 years from now we will still be 35$ a share.
4-20-2007 @ 4:08PM
Shirley Pavetto said...
I am a widow of a GE Engineer. I have always been a beliver in GE. However, it is deteriorating since the new CEO J. Immelt. The Ge retirees have not been give a raise for several years. The stock seems to go down when the rest of market goes up. I now get a pension which is lower than the pension (of 1/2 of my husband) 15 years ago. I think it is time for Mr. Immelt to think of GE retirees and the stock holders that have believed in this company.