Jeff Immelt, the CEO of General Electric Co. (NYSE: GE), the large diversified industrial, financial and entertainment complex, said on March 12 that GE’s prospects for 2008 remain on course despite the difficult economy. Immelt acknowledged the difficult business climate, but maintained that the company would see a revenue growth of $195 billion this year, a ten percent increase over 2007. 2007 saw GE increasing its revenue fourteen percent. Immelt also pointed out that earnings per share growth should likewise see ten percent growth in 2008.
While these numbers may appear modest to traders and investors looking for growth, when measured against many other large companies – particularly financial institutions, retailers and other hard hit companies – these figures are fairly impressive. GE has a wide range of products and is involved in a number of industries, which in part explains its resistance to the general business downturn and otherwise shrinking EPS estimates Wall Street continues to see. General Electric makes appliances, lighting equipment, medical-diagnostic, bioscience and technology products; is involved in electricity and power generation; makes electrical distribution equipment such as generators; manufactures locomotives; has a large consumer financial division, and owns NBC-Universal, an entertainment company. This list is hardly exhaustive; it only touches on some of the larger businesses GE is in.
GE’s business outreach is also highly global, with over 50% of its revenue generated outside the US. Its global revenue growth in 2007 was more than 22%. This, along with its well-run diversified business divisions, provides some insulation to downturns in the domestic business cycle or when business falls off, as it usually does in some segments on a recurring basis.
GE has a market cap of $343 billion and had revenue of $170 billion in 2007, with net income of $22 billion, or $2.17 per share. It has a dividend yield of 3.16% and sells at a PE of 15.6, with cash flow of $3.25 per share on a trailing twelve months basis. Its next quarterly report is expected to show $0.51 a share EPS, which would be up from $0.44 the same quarter a year ago. Earnings projections for 2008 are at $2.43 and $2.70 per share for 2009. Significant in this difficult business climate is that, unlike many other large cap companies, its earnings projections by analysts have remained steady, whereas many other companies have seen their estimates chopped down on a monthly or weekly basis. While this is perhaps only the absence of a negative, given the shrinking earnings reports from some stocks, it’s something to note.
The stock (at times) historically behaves more like a value stock or former growth stock, yet in good market times it has seen considerable spikes. Note its rise from the ten to twenty dollar area ten or twelve years ago, when its price climbed steadily up into the sixties over a five or six year span. GE stock has traded from 31.65 to 42.15 in the last year, with a recent trade at 33.82, so while it hasn’t been on the ascent, it’s simply a reminder that neither has the market. Again, its comparative resistance to decline may set it up to advance in the next upturn in the market.
In other notes on the stock, CEO Immelt said they were not going to sell the NBC-Universal division, and he issued a note of confidence on the stock, saying he would personally continue to purchase it on the open market. GE has historically been, and often remains, a large holding of many institutional and mutual funds. There may be greater growth potential here than is apparent when the market gets healthy again.
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