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Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:

COVER STORY: GE's Moment by Vito J. Racanelli

Summary: Concerns over General Electric's (NYSE:GE) complexity, earnings restatements, and the oversized contribution its finance unit is making to its bottom line (29% of revenue but 51% of profits) have kept its shares stagnant ($37.45 -- unchanged since 2004 and down from $60 highs in 2000). But investors may be underestimating its potential: 1) Despite its size, GE is showing corporate agility; witness its sale of GE Plastics and purchase of Abbott Laboratories' (NYSE:ABT) diagnostics business this year. 2) 4% global growth and even higher emerging market growth are creating friendly markets for GE's industrial and infrastructure products; within five years, GE should earn 55-60% of its revenue abroad. 3) Its jet engine and jet leasing businesses stand to benefit from a worldwide surge in travel. 4) GE Healthcare earnings growth is slated for 10-15% in 2007. 5) Despite its overweighting, GE Finance looks to sustain annual profit growth of 10%. 6) Margins are up 2% since 2004 (from 13.5% to 15.5%) and CEO Jeffrey Immelt has said he will surpass peak margins of 18.4% within two years. "It is going to happen," he promises, "it is seared on my forehead and every forehead of every GE manager." Service contracts on installed industrial equipment will aid this with their high-20s margins. Barron's looks for investors to warm up to the shares as margins climb and as earnings sustain multi-year double-digit growth. Shares could be worth mid-50s within three years -- a 15% annual return.

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Conference call transcript: General Electric Q1 2007

General Electric 03 06 2007

Source: Margin Growth Should Drive GE for Years to Come - Barron's