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Summary

  • Earnings show General Electric is meeting its earnings and focus goals.
  • No surprises, but a 10% increase in backlog confirms industrial recovery.
  • Reaffirm "Buy" for income-oriented investors and "Hold" for growth investors.

Last night, General Electric (NYSE:GE) announced second-quarter earnings increased 13% to $0.35/share, with operating earnings of $0.39/share meeting the consensus estimate. On an operating basis, earnings increased by 8%. Highlights include a 20-basis point increase in industrial segment margins, with backlog of equipment and services increasing 10% to $246 billion and the company confirming the "split-off" of the North American Retail Finance business (Pending:SYF) will occur in a July IPO (sale of 15% for +/-$3.1 billion; remaining shares tax-free to shareholders in 2015).

Earnings, were in line with my expectations ("Is GE The Perfect Company") and don't, at this point, portend a change in fiscal 2014 or out-year earnings. GE is continuing to make slow-but-steady progress as it completes its refocus on businesses where it competes in globally-oriented, "oligopoly-type" businesses that leverage its strengths of technology, scale and balance sheet.

Q2 earnings confirm my belief that GE is a good bet (with its 3.3% dividend) for income-oriented investors and still pricey on a forward PE and PEG (PE/Growth) basis for growth and total return investors.

All investors should conduct their own due diligence and make their own decisions. The above reflects the author's personal opinion and should not be considered investment advice.

Disclosure: The author has no positions in any stocks mentioned, but may initiate a long position in GE over the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: Update: General Electric Earnings Meet EPS Target Of $0.39/Share

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