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General Electric: The 2015 Outlook Could Have Been Better
- GE presented its 2015 guidance late on Tuesday at its annual investor meeting.
- EPS is projected to range from $1.70 to $1.80.
- "Capital returns” could be as much as $30B.
- However, the report is not all positives.
- General Electric just held the company’s Annual Outlook Meeting.
- General Electric is a massive global conglomerate and bellwether stock for the health of global industrial growth.
- The following are the highlights from the meeting as I see them.
- GE offered weaker-than-expected guidance for 2015, due to weakness at its oil and gas unit.
- With producers cutting cap-ex, I believe the oil and gas unit will report even weaker numbers than forecast.
- With problems at its oil unit and slow growth elsewhere, I wouldn't buy GE until $23.
- GE expects 2015 EPS to be in the range of $1.70-$1.80.
- Expects oil & gas to be a challenging segment.
- Despite challenges, the company continues to offer a decent dividend yield.
- This article offers up a deeper dive into the lighting segment of GE.
- GE's lighting segment is compared to Cree, the lighting segment of Philips and Whirlpool.
- The analysis derives a value of about $6.13 billion for the appliance & lighting segment. When the appliance sale is removed, the lighting segment has a remaining value of $2.83.
- This article offers up a deeper dive into the transportation segment of GE.
- GE's transportation segment is compared to Cummins, PACCAR and Caterpillar.
- The analysis derives a value of about $43 billion alone for the transportation segment.
General Electric: Dividend Increase Is Nice, But Danger Lurks
- On December 12, GE raised its dividend by 5%, to $0.92 per share annualized.
- This was a modest increase, as it was well below last year's 15% increase. It's likely GE took a cautious approach on the dividend because of the fallout in oil.
- Collapsing oil prices will negatively impact GE because of its large energy business. With a low dividend raise, management may be signaling trouble up ahead.
- Investors should wait for a better price before buying GE stock.
- GE’s strategy remains focused: be the world’s best infrastructure and technology company with a smaller specialty finance business.
- Important portfolio moves, growing the services model and delivering cash to shareowners are key parts of this strategy.
- GE to hold its Annual Outlook investor meeting on Tuesday 12/16.
- Written by VP of GE Investor Relations, Matt Cribbins.
- GE announced an increase of 5% to the company's quarterly dividend.
- Going forward, GE will have to trade off between the dividend, buybacks, and internal growth opportunities.
- GE's new annualized dividend is $0.92/share, which represents a payout ratio of 64% of free cash flow.
An Unprecedented Dividend Growth Buying Opportunity Materializes
- In my last piece regarding General Electric I listed my top concerns for the company.
- I like to throw all the potential negatives against the wall and see what sticks when major market shifts occur.
- I received a tremendous response to the article regarding the veracity of the ‘so-called’ negatives. The value of the feedback from comments section was incredible.
- In this article I will detail the mitigating factors regarding the potential headwinds. Furthermore, I will make the case General Electric offers an unprecedented buying opportunity.
Update: General Electric Dividend Increase On Time, But Under Budget
- GE announced a 5% dividend increase to an annual $0.92/share.
- While the dividend increase was predicted, the $0.01 increase was a disappointing byproduct of the drop in oil.
- GE is still a compelling story due to modest valuation, attractive yield and solid balance sheet.
GE's Software VP: Tapping The $12B Industrial Data Analytics Opportunity In Japan
- GE opens its Predix platform to SoftBank, the Japanese telecommunications and Internet giant, in first external monetization of its industrial software platform.
- The convergence of hardware and software represents a $12B opportunity in Japan and $200B globally.
- In a world of connected devices and brilliant machines, Predix is an assembly line for creating the software that holds everything together.
- This article offers up a deep analysis into the healthcare segment of General Electric.
- GE is compared to Johnson & Johnson, Cerner Corporation and Thermo Fisher Scientific.
- This analysis shows GE's healthcare segment is valued at just under $50 billion.
- GE's healthcare segment is a non-core holding and might make sense to spin off in the future.
- I have been writing positive articles regarding General Electric’s prospects for growth for several months now.
- As of Tuesday December 9th the stock is up a mere 5% since my first recommendation to buy in April.
- In this article I’ve decided to focus on what many have touted as the potential negatives for the company going forward. Hopefully, this article will inspire a tremendous debate on.
- I will publish a follow up article in a few days detailing all the valuable feedback and insights brought forth in this article.
- This article offers up a deep analysis into the aviation segment of General Electric.
- GE's aviation segment is compared to Boeing and the Aerospace segments of Honeywell and United Technologies.
- This analysis shows the value of GE's aviation segment is valued at nearly $75 billion.
- GE's aviation segment has shown consistent strong growth over the last four years and appears to be stronger than the competition.
- The market does not fully appreciate GE's exposure to oil.
- While oil and gas services is only a faction of GE's revenue and profitability, this segment has generated the vast majority of overall revenue and profit growth.
- Lower oil will cut this unit's margins and revenue as producers cut back on cap-ex.
- GE is fairly valued around $26, and I would not buy the stock here.
- Return on equity has increased due to an increasing profit margin.
- The equity multiplier decreased due to an increase in retained earnings.
- GE's return on equity is primarily due to having a high equity multiplier value.
General Electric: The Opportunity Of The Coming Decade Materializes
- The General Electric Power Generation Products President and CEO Vic Abate presented at the Credit Suisse Global Industrials Conference recently.
- Mr. Abate had some interesting information regarding General Electric’s Power Generation Products division’s prospects for growth over the next 10 years.
- In this article, I will cover the major highlights as I see them from the presentation and attempt to separate the wheat from the chaff for dividend growth investors.
- GE is suitable for both the Defensive Investor and the Enterprising Investor following the ModernGraham approach.
- According to the ModernGraham valuation model, the company is overvalued at the present time.
- The market is implying 5.2% earnings growth over the next 7-10 years, which is above the company's actual growth in recent years.
Yesterday, 10:17 AM| 1 Comment
Yesterday, 7:06 AM
- Alstom (OTCPK:ALSMY) CEO Patrick Kron hopes to reach an agreement with the DOJ soon regarding its ongoing bribery case and said that the French company would not be able to transfer any of the fine to General Electric (NYSE:GE), which is buying most of its power business.
- However, the impact of the fine would be mitigated by a positive adjustment to the agreement - extra money to be paid by GE to use the Alstom brand, announced Kron.
- As a result the overall negative impact would be around 1%-2% of the €12.4B GE deal.
- Previously: Alstom confirms U.S. bribery settlement (Dec. 17 2014)
- Previously: Alstom nears record $700M bribe settlement with DoJ (Dec. 16 2014)
Thu, Dec. 18, 6:17 PM
- Cheniere Energy Partners (NYSEMKT:CQP) and GE sign a $1B, 20-year deal to provide services and parts for the Sabine Pass liquefied natural gas export terminal in Louisiana.
- GE will provide spare parts and planned inspections, maintenance services and round-the-clock technical support for the gas turbines and refrigerant compressors on the first four liquefied natural gas trains now under construction at the Sabine Pass export facility.
- Each train will have six gas turbines and is expected to have nominal capacity to produce ~4.5M metric tons/year of LNG.
Tue, Dec. 16, 5:21 PM
- GE offered conservative guidance for its FY 2015 earnings in an investor presentation today, predicting EPS of $1.70-$1.80 vs. analyst expectations of $1.79, and seeing industrial EPS growing by "double digits" to $1.10-$1.20 and ~$0.60 at GE Capital.
- "We like our competitive position" in the energy industry, CEO Jeff Immelt said while acknowledging the company is cutting costs at its oil and gas unit and expects operating profit there to come in flat to -5% next year.
- “The rest of the company looks fine,” the CEO said, with organic industrial growth expected at 2%-5% in 2015; GE maintained an outlook for 17% margins in 2016.
- Immelt also said the slowdown in China isn't a worry, emphasizing that aviation and other industries in China remain strong.
Tue, Dec. 16, 11:22 AM
- Alstom (OTCPK:ALSMY, OTCPK:AOMFF) is close to settling a bribery case with the U.S. Justice Department for $700M, according to multiple reports.
- A settlement of that size would be the largest-ever settlement between a corporation and the Justice Department related to foreign bribery.
- The settlement removes a cloud over the company before its planned sale to GE.
Tue, Dec. 16, 8:58 AM
- GE agrees to acquire Oceaneering's (NYSE:OII) Subsea Electric Actuator product line, which specializes in the design and manufacturing of specialty subsea products with a focus on electric valve actuators.
- GE says the acquisition of the product line will pave the way for electrification in its oil and gas subsea space, providing a new technology that is faster to operate for processing applications, has excellent enhanced diagnostic capabilities and can be seamlessly integrated into a customer's existing controls, communications and power network.
- Financial terms are not disclosed.
- GE -0.8% premarket.
Fri, Dec. 12, 11:57 AM
Fri, Dec. 12, 7:48 AM
- General Electric (NYSE:GE) is poised to raise its quarterly dividend, Bloomberg reports, as CEO Jeffrey Immelt rebuilds the payout he slashed during the recession.
- At an industry conference in May, Immelt said GE would "continue to grow the dividend aligned with earnings." Based on current profit estimates, this would translate to an increase of about 2% from the current distribution of $0.22/share.
- Immelt will meet with investors and analysts in New York on Dec. 16 to discuss GE’s 2015 outlook.
Mon, Dec. 1, 5:49 PM
- General Electric (NYSE:GE) was the day's biggest loser among the Dow 30, as J.P. Morgan analysts Stephen Tusa and Rajat Gupta include GE among among industrial companies confronted with big risks through their exposure to oil drilling.
- "The game has changed," the analysts say in now seeing a spread in EPS growth between those that have material exposure to energy and those that do not to a range of ~800 bps; regarding GE, JPM drops oil/gas growth to -2% from +5% and power/water growth to zero from +3% on the back of distributed power weakness, which it pegs at mid-single digit declines for two years, along with the onset of a decline in gas turbines.
- The firm also downgrades Dover (NYSE:DOV) to Underweight, reaffirms its Underweight on Rockwell Automation (NYSE:ROK), and continues to avoid Emerson Electric (NYSE:EMR), SPX Corp. (NYSE:SPW) and GE; it still likes a few with oil/gas exposure, such as Pentair (NYSE:PNR) given ongoing execution/margin potential, and Honeywell (NYSE:HON), given less direct impact and a strong balance sheet story.
Tue, Nov. 25, 4:08 PM
- "In light of the substantial similarity of GE Capital's activities and risk profile to that of a similarly-sized bank holding company, the Board is proposing to apply enhanced prudential standards to GECC that are generally similar to those that apply to large bank holding companies," says the Fed, opening up a 60-day comment period on the idea.
- The Financial Stability Oversight Council last year designated GE Capital as a non-bank SIFI.
- In addition to having to comply with the so-called enhanced supplementary leverage ratio, GE Capital will be subject to restrictions on inter-company transactions between it and General Electric.
Mon, Nov. 24, 3:43 PM
- Twenty-two spinoffs have been completed in 2014, the most in a decade, and another 28 have been announced. Among the catalysts are activist investors, so Credit Suisse screened for companies with multiple business segments, slow growth, and stocks trading for lower multiples than peers, in other words, "good, quality companies that are struggling to grow."
- The list is heavy on big media names like Time Warner (NYSE:TWX) and Twenty-First Century Fox (NASDAQ:FOXA), big tech like Oracle (NYSE:ORCL), Symantec (NASDAQ:SYMC), and IBM, and big industry like Lockheed Martin (NYSE:LMT), Ingersoll-Rand (NYSE:IR), and Raytheon (NYSE:RTN), but just two financial names - Travelers (NYSE:TRV) and Torchmark (NYSE:TMK).
- The rest: MO, CA, WU, DPS, PBI, SJM, HRS, SWK, EMR, WLP, MAT, GE, SNA, LLL, ITW, STJ, PDCO, HPQ, DLPH, HAS, NAVI, GME, CBS, JNJ, SLB.
Thu, Nov. 20, 4:08 PM
- The business owns and operates more than 200 residential properties consisting of more than 10K units. Blackstone (NYSE:BX) is paying just north of ¥190B (about $1.6B).
- GE Capital Real Estate has global assets of $36B, and the Asia-Pacific unit has $5.1B.
- Francois Trausch, CEO – Asia-Pacific at GE Capital Real Estate: “This transaction supports our global strategy to reduce our equity book as we continue to build our global debt operations."
- Source: Press release
Thu, Nov. 20, 7:17 AM
- General Electric (NYSE:GE) is looking to expand its wind-power business globally while providing services such as data analytics to improve turbine performance. The conglomerate plans to have a presence with its wind turbine business in 35 or more countries next year, up from eight in 2003.
- Anne McEntee, CEO of GE's renewable energy business, points to the importance of diversifying into different countries to take advantage of where energy demand and policy are encouraging.
- GE does not disclose revenue for its wind business, which is part of its Power & Water segment, but it ranked as the world's fifth-biggest wind-turbine supplier last year according to Navigant Research.
Tue, Nov. 18, 6:48 PM
- Halliburton’s (NYSE:HAL) $34.6B buyout of Baker Hughes (NYSE:BHI) has caused HAL shares to plunge 12% since the deal was announced Monday, the worst two-day performance for an acquirer’s stock this year; on average, a company announcing a deal has seen its stock pop 3.1% on the news.
- But analysts say the deal may present game-changing opportunities for a few small and mid-cap oilfield services firms with enough cash on hand to buy a chunk of HAL's expected divestments without diluting their stock or damaging their credit rating.
- Tudor Pickering Holt's Jeff Tillery speculates that Forum Energy Technologies (NYSE:FET), National Oilwell Varco (NYSE:NOV) and GE would be interested in HAL's manufacturing businesses that may come up for bid, while Superior Energy Services (NYSE:SPN) and Frank's International (NYSE:FI) might want certain services-oriented businesses.
- Weatherford (NYSE:WFT) would seem like a logical buyer of some assets and could make it happen with a mix of cash and stock, but RBC's Kurt Hallead thinks HAL might not want to cooperate with a company that could essentially become what Baker Hughes was.
Mon, Nov. 17, 3:59 PM
- In the wake of Halliburton's (NYSE:HAL) $34.6B offer for Baker Hughes (NYSE:BHI), it appears the next hot sector for M&A action is energy: More consolidation is likely, given the weakness for stocks in the oilfield services subsector, low interest rates, and as a drop in demand for oil increases cutthroat pricing competition.
- Speculation is running rampant as investors try to figure out who is next in an industry that is sure to undergo some more consolidation; some names identified as possible candidates include Kodiak Oil and Gas (NYSE:KOG), Marathon Oil (NYSE:MRO), Northern Oil and Gas (NYSEMKT:NOG), Anadarko Petroleum (NYSE:APC), Pioneer Natural Resources (NYSE:PXD).
- GE could go after National Oilwell Varco (NYSE:NOV) to show it is serious about the energy industry after last year’s purchase of pumpmaker Lufkin, Royal Bank of Canada says, and Oppenheimer says even BP could be an acquisition candidate.
- But Morgan Stanley does not see offshore drillers getting in on the action, as larger players like Diamond Offshore (NYSE:DO), Transocean (NYSE:RIG) and Seadrill (NYSE:SDRL) are still addressing dividend concerns while smaller companies such as Atwood Oceanics (NYSE:ATW) and Pacific Drilling (NYSE:PACD) still trade close to replacement value.
Mon, Nov. 17, 12:21 PM
- GE's (GE +0.6%) China head says she expects the company to continue posting double-digit order growth in the country despite a slowing economy and a government anti-corruption campaign that has delayed approvals for large-scale projects.
- While GE is seeing delays on some projects it is bidding for in China, particularly in the energy and health care sector, it foresees only a short-term impact on its operations, says Rachel Duan, who became GE's chief executive for greater China in July.
- China's government is "trading the speed of growth for the quality of growth, shifting to more consumer-oriented growth," Duan says.
GE vs. ETF Alternatives
General Electric Co is a diversified company with products & services that range from aircraft engines, power generation, oil & gas production equipment, & household appliances to medical imaging, business & consumer financing and industrial products.
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