General Electric (GE) is currently considering many choices that promise to delight investors. As a multinational and diversified company, General Electric's operations are global. GE's manufacturing and services operations include energy, appliances, aviation, jet engines, rail, lighting, water, healthcare, software, consumer and business financing.
Comparable to General Electric in the business model is Siemens AG (SI). Siemens and General Electric are significantly exposed to the prevailing financial crisis in the Eurozone countries, but while Siemens currently trades at a price earnings ratio of just 12 and has been trailing the S&P 500 index by more than 10 percent since the onset of this year, General Electric is trading at a price earnings ratio of 18. Notwithstanding this difference, Siemens beats General Electric in earnings per share and dividend yield, which stands at 8.8 and 3.89 respectively compared to 1.24 and 3.1 respectively for General Electric.
GE's Purpose Driven Restructuring
As part of its new strategic moves which promise to lift GE stock value soon, General Electric is reorganizing its composite structure with the aim of making the company more profitable. Assets considered not so profitable or not within the core business structure of the company are being sold. The holdings of General Electric in commercial real estate have been sold recently and the company is presently considering selling its 33% banking shareholding in Thailand's lender, Bank of Ayudhya, and worth $2.2 billion.
Earlier in July, General Electric sold its real estate subsidiary - Business Property Lending Inc. - to EverBank Financial Corp, a private equity backed company, in a transaction valued at $2.51 billion, which brings the dollar sum of the total assets sold by GE to date to $3.9 billion. General Electric first invested in Thai's Bank of Ayudhya in January 2007, but following a loss of $32 billion from its consumer and finance subsidiary due to the recent financial crisis, the CEO of GE, Jeffrey Immelt, is considering reducing the size of the company's capital unit. In apparent approval of GE's capital unit repositioning strategy, GE stock gained 1.11% immediately after the news filtered out through Bloomberg.
In its effort to streamline the business of the company into three core units made up of Power and Water, Oil and Gas, and Energy Management, GE hopes to save $200 million in overhead expenses from each unit on a yearly basis.
What the Informed Analysts Are Saying About GE
As expected, a number of research analysts have begun to appraise GE's future growth and financials. Analysts at Barclays Capital, JP Morgan Chase, Citigroup and Oppenheimer among others have appraised the company's future outlook, with many placing an outperforming status and buy recommendation on GE stock. With the restructuring of its energy unit, GE is positioned to withstand the onslaught of its direct competitors like Siemens and Emerson Electric (EMR). GE's recent restructuring and increased funding is also beneficial to its Oil and Gas unit, where it is better positioned to provide cutting edge engineering works to companies like Transocean Limited (RIG) and Diamond Offshore Drilling (DO), in addition to providing exploration, shipping and retailing energy replacement parts to companies like Petrobras (PBR) and Exxon Mobil (XOM).
Evaluation and Outlook
Recently, General Electric invested a lot of money in its energy unit, GE Energy, in its effort to revive the core aspect of its original business. This new strategy has paid off in its recent forecast estimates. The forecasts recently presented to Wall Street analysts shows that GE is presently growing its earnings at a double digit rate, which makes the company a top earner by forecasts estimates. The energy division alone is expected to increase the profits of the company by $1.76 billion or 13 percent. GE is also looking to earn more revenues from many emerging markets due to lower costs of raw materials and labor. On Friday, September 7, GE declared $0.17 regular quarterly cash dividend payouts per share, payable to shareholders on October 25 with a forward yield of 3.17 percent.
GE is definitely a growth and steady stock using all standard metrics, and with its recent business repositioning the company stands to profit immensely in the long term. Therefore, it makes sound sense to consider GE stock.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.