Continue reading General Electric's Jeff Immelt isn't changing a thing

General Electric's Jeff Immelt isn't changing a thing originally appeared on BloggingStocks on Tue, 22 Apr 2008 16:53:00 EST. Please see our terms for use of feeds.

General Electric (NYSE: GE) not only disappointed Wall Street investors this past Friday with its horrible results, but shocked investors as CEO Jeffrey Immelt gave the "all is alright" signal in mid-March. He should resign as he has had nearly 7 years to grow this once great company.

GE should also bite the bullet and spin off several segments into separately traded companies. I wrote about this extensively last year for AOL, but now the rationale is abundantly clear. This company--a major conglomerate--cannot deliver decent shareholder returns. Immelt took the reigns of GE on September 7,2001 when the stock was at $40. Nearly 7 years later the shares are at $32 and barely holding on. I find it amusing that some "value" investors think GE is interesting at this level. These were the same investors that found GE interesting and a value-play at $38 last year.

The problem with GE is not that it's too big: the problem is it is too complex. The largest industrial company in the world now is Exxon Mobil (NYSE: XOM) with expected revenues this year of $550 billion. This company however is strictly in the energy sector--it's measurable and quantifiable. GE is a mish-mash of businesses, from light bulbs to jet engines to appliances to consumer loans, whereby some segments are doing well and others horribly. How does any analyst assign a proper PE ratio expectation?

One segment, the infrastructure division grew its revenues by an admirable 23% this past March quarter and its profits by 17%. With this kind of growth and visibility into the next 18-24 months on revenues because of contractual commitments, this division alone could command a 25 + PE ratio. GE as a whole is now trading at 14 X 2008 EPS estimates of $2.20-2.30.

The GE Financial segment was woeful and provided the negative surprise. This segment on its own would trade at a PE ratio of between 9-11 times. The NBC-Universal division showed only 3% year-over-year growth, but cash flowed very well. This segment should command a 15-17 PE multiple.

Continue reading GE: Time to Spin-off the Parts

GE: Time to Spin-off the Parts originally appeared on BloggingStocks on Sun, 13 Apr 2008 20:45:00 EST. Please see our terms for use of feeds.

General Electric Co. (NYSE:GE) got more than a lot of Wall Street observers expected for its plastics unit. Saudi Basic Industries Corp ponied up $11.6 billion in a cash-and-debt deal. GE will use the money to buy back more of its shares, a nifty way to raise EPS when earnings themselves are not growing as fast as investors would like.

Even though the deal has been expected for several days, and GE announced its plan to sell the unit several months ago, no one seems to care, at least not based on the conglomerate's stock price. The share price did get a bump up in late April when talk about breaking the company into pieces resurfaced in the markets. The stock has traded sideways since then, and is still flat over the last two years compared to an increase of well over 20% in the S&P.

Based on GE's public filings, the plastics operation contributed less than 4% to revenue. The transaction should have almost no effect on net income.

Of course, what investors want from GE is what it is not giving them: a major restructuring. GE's board wants the company to remain a conglomerate. There is no other conclusion to draw from the company's actions.The stock buy-back is cold comfort when the stock won't go up.

Douglas A. McIntyre is a partner at 24/7 Wall St.

GE exits plastics originally appeared on BloggingStocks on Mon, 21 May 2007 09:45:00 EST. Please see our terms for use of feeds.

Various reports are circulating that General Electric Co. (NYSE: GE) is indeed close to selling its vaunted plastics/chemical division. The leading contender is a Saudi Arabian firm, which would make sense for GE as it has close ties in Saudi Arabia. But the real question is what are the implications for General Electric and its patient shareholders?

I have been recommending GE to my website members because I feel this great conglomerate, which has seen better days, is set to either grow its revenue and earnings base, or the company will have to split up into various publicly traded companies. The CEO, Jeffrey Immelt, has been on the job for six years and has seen stagnation in shareholder value since his tenureship began. The company is too important for millions of investors to be a perennial underperformer. The potential sale of the chemicals/plastics division is the beginning of the evaluation of everything GE owns and manages.

GE is suffering from the law of large numbers. With expected revenues this year of $180 billion, it is difficult to move the needle more than 8-10%. A 10% revenue increase is $18 billion! With the possible single-digit growth of revenues and earnings, investors will continue to be both impatient and watch as the price-earnings (PE) multiple shrinks or remains stagnant. Both situations are untenable, and the board of directors of GE will be forced by both shareholders and fiduciary responsibility to examine "other options." The dreaded "other options" scenario is to examine and, more importantly, value each entity as a standalone business. The conclusions could be terrific for shareholders, but not for the ultimate survival of the conglomerate.

Continue reading General Electric: Implications if plastics division is sold

General Electric: Implications if plastics division is sold originally appeared on BloggingStocks on Sat, 19 May 2007 11:40:00 EST. Please see our terms for use of feeds.

General Electric Co. (NYSE: GE), Gentleman's C CEO Jeff Immelt, is close to selling GE Plastics to Saudi Arabia's largest public company, the Saudi Basic Industries Corporation. You'll remember Saudi Arabia as the supplier of 15 of the 19 9/11 mass murderers.

But Immelt is going to collect $11 billion and dump an under- performing unit where both he and his predecessor Jack Welch worked. Competition and price increases in raw materials have squeezed profit margins, even though GE Plastics increased product prices. For 2006, the division reported $6.6 billion in revenue -- about the same as in 2005 and its profit fell 22% to $674 million.

The deal raises national security concerns but investors seem to like it a little -- GE is up 1% in early trading.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He owns GE shares.

GE to sell plastics to Saudi Arabian company originally appeared on BloggingStocks on Fri, 18 May 2007 11:00:00 EST. Please see our terms for use of feeds.

Continue reading Buffett's big buy: Our top picks include Allstate, Lowe's, Target

Buffett's big buy: Our top picks include Allstate, Lowe's, Target originally appeared on BloggingStocks on Fri, 11 May 2007 20:49:00 EST. Please see our terms for use of feeds.

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.

Is General Electric now a Growth Story? originally appeared on BloggingStocks on Mon, 16 Apr 2007 14:36:00 EST. Please see our terms for use of feeds.

If the term holistic can be applied to automotive design, the concept car just brought to debut by Hyundai Motors Co. (Other OTC:HYMLF) in concert with General Electric Company's (NYSE:GE) GE Plastics would surely fit that description. The Hyundai QarmaQ concept is pushing the envelope in crossover utility vehicle design and construction. By the utilization of a high content of recycled plastics, derived mostly from discarded soft drink bottles, and some 29 other design, construction and material innovations, the QarmaQ boasts a weight reduction of 130 lbs as compared to vehicles of similar size and class. The designers claim that this results in a reduction in fuel usage equal to about one and a half SUV fuel tanks per vehicle per year. Granted, that may not seem like much when viewed on an individual vehicle basis, but multiply it by the total number of SUVs on the road and that's a lot of gallons saved.

Hyundai (pronounced hun-day) states that the QarmaQ Advanced Technology Demonstration Vehicle is a seamless blending of 30 environmentally progressive technologies that encompass the total vehicle design. Safety, economy, environment, and drivability are brought together in an aesthetically unique package that brings some strong design messages to the forefront of automotive engineering. Hyundai drops the gauntlet of change at the feet of the auto manufacturing world stating: "The QarmaQ is lighter, stronger, and more economical than any current production CUV in its class. It also offers significant recycling advantages both in construction and eventual disassembly. In short, it is a viable and realistic glimpse of the future potential of personal automotive transport. "

In addressing the issues of safety, Hyundai goes beyond the prime consideration of vehicle occupants and considers also the vehicle's surrounding world. Realizing that in continually compacting metro environments, our motor vehicles sometimes are involved with unavoidable pedestrian contacts, Hyundai has taken that as a design challenge and has trademarked QarmaQ's "Elastic Front" safety system and calls it "the world's first global pedestrian protection system." This system utilizes multiple advanced materials with inherent energy absorption properties and creates a vehicle skin that, when coupled with specialized underpanel construction elements, seeks to dissipate the force of impact and thereby reduce victim trauma in cases of vehicle/pedestrian collision. The Hyundai Elastic Front system is currently undergoing final testing to accomplish EEVC WG17 Phase2, Euro NCAP, and JNCA pedestrian impact requirement validation.

Continue reading Hyundai teams with GE Plastics

Hyundai teams with GE Plastics originally appeared on BloggingStocks on Sat, 10 Mar 2007 17:40:00 EST. Please see our terms for use of feeds.

According to a report from the Wall Street Journal[subscription only], General Electric Company(NYSE:GE) is auctioning its plastics division, which could result in a price tag of $10 billion or more. True, it's a historic business for the firm (started in 1930) - but it's simply not meeting its benchmarks for margins and growth.

Yes, the likely buyers should include a variety of major private equity firms.

However, GE is making something clear: no club deals. That is, private equity firms will not be allowed to team-up to make a bid.

Club deals are a fairly recent phenomenon. Basically, it helps private equity firms diversify risk. It also helps make it easier to pull off large transactions.

However, it could also mean less competition. This, in turn, could lead to lower bids.

Interestingly enough, this has caught the attention of the Justice Department, which enforces the antitrust laws.

So, this looks like a smart move for GE. And, it would not be a surprise to see other companies follow the lead.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

No clubbing at GE originally appeared on BloggingStocks on Tue, 09 Jan 2007 11:19:00 EST. Please see our terms for use of feeds.