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On Deck: GE’s Friday Surprise

|Includes: General Electric Company (GE)


General Electric (NYSE:GE) is due to report its Q1 results in the pre-market on Friday, April 17. Analysts polled by Thomson Reuters expect the company to report a profit of $0.21 per share on revenue of $39 billion. While most of Wall Street has shied away from GE, and for good reason, the time has come for a rebound on the heels of an in-line or upside earnings surprise.

From a fundamental point of view, the company maintains a healthy cash position and increasing revenues from the energy infrastructure and technology infrastructure segments. In addition, the company has signed new contracts and expanded a manufacturing facility in China, improving margins on related products and expanding its foothold in a country likely to become an ever greater economic engine.

The GE Capital credit concerns have been overblown and investors have been stepping back into the stock, pushing it up from staggering lows in the 6’s recent to over $11. There is still time and room to run. With a health dividend yield of greater than 10% and the sector’s lowest P/E, most investors would be wise to get paid while waiting for the stock price to rise.

From a historical price reaction perspective, when it comes to pre-market earnings events GE tends to see follow through gains or losses from the pre-market to the regular session close. In other words, the stock tends to follow-through with the trend that develops ahead of the open.

While we anticipate a positive reaction to any in-line or above estimates results, extended-hours traders tend to be right on with GE. As history shows and from a risk/reward standpoint, its best to just go with the trend.

On Jan. 23, 2009, shares fell 6.1% in the pre-market session after the company reported earnings in line but missed with revenue. The loss fattened to 10.7% in regular trading later that day.

On Oct. 10, 2008, GE rose 0.5% in pre-market trade after posting Q3 results in line with Street estimates. The stock recorded a sharp rise in the regular session, soaring to a 13.1% gain in the Oct. 10 regular session.

On July 11, 2008, GE declined 0.5% in pre-market trade after meeting earnings expectations, beating on revenue, and backing its fiscal year view. The stock turned positive in the following regular session, eking just higher, up 0.07% by the closing bell.

On April 11, 2008, GE tumbled 11.5% in pre-market trade after missing Q1 expectations and setting its guidance below Street estimates. It added to its downside in the following regular session, losing 12.8% by the closing bell.

On Jan. 18, 2008, GE advanced 2.3% in pre-market trade after meeting Q4 expectations and maintaining its 2008 guidance largely in line with the Street view. The stock added to its upside in the following regular session, gaining 3.3% by the closing bell.

Disclosure: no position