The singing/dancing conglomerate General Electric
What analysts say:
- Buy, sell, or waffle? Sixteen out of 20 analysts call GE a buy today; the other four prefer to hold. Our Motley Fool CAPS community has weighed in with 1,750 ratings on the company, making this a three-star stock.
- Revenues. The average forecast calls for $44.2 billion in sales, 9.7% above the $40.3 billion of the year-ago period.
- Earnings. Analysts want to see $0.64 per share on the bottom line, with no report straying further than a single penny from the average call. It would be a 16% improvement over last year.
What management says:
In the latest earnings report, CEO Jeffrey Immelt put on his rose-tinted glasses to look at the future. He said, "We feel like GE is very well positioned for the environment we see in the fourth quarter of '06 and beyond. Our infrastructure business is excelling, and we have a very substantial backlog going into 2007. The growth initiatives are working. The NBCU turnaround we feel is in great shape. That's going to provide earnings growth going into 2007." More to the point, Immelt noted that GE is "exiting slow growth businesses and redeploying capital into faster-growth businesses."
What management does:
Margins have been affected by rising interest rates over the past couple of years, as a significant part of GE's revenues come from its financing division. But management's stated strategy of striving for No. 1 or No. 2 in every market it enters is driving efficiency improvements. A constant remolding of the conglomerate's constituent parts is generating improving returns on both assets and equity.
|
6/2005 |
9/2005 |
12/2005 |
3/2006 |
6/2006 |
9/2006 |
|
|---|---|---|---|---|---|---|
|
Gross |
39.9% |
40.3% |
39.2% |
38.8% |
38.7% |
38.1% |
|
Operating |
16.2% |
16.7% |
15.8% |
15.8% |
15.8% |
15.5% |
|
Net |
13.7% |
14.4% |
11.0% |
11.0% |
10.9% |
10.8% |
|
FCF/Revenue |
36.0% |
40.0% |
35.0% |
32.0% |
32.1% |
28.8% |
|
Efficiency Ratios |
6/2005 |
9/2005 |
12/2005 |
3/2006 |
6/2006 |
9/2006 |
|---|---|---|---|---|---|---|
|
ROA |
1.9% |
2.0% |
2.1% |
2.1% |
2.2% |
2.3% |
|
ROE |
16.2% |
16.4% |
16.6% |
17.0% |
17.4% |
17.6% |
One Fool says:
The GE of tomorrow could be very different from GE today. Management has a very open attitude to dropping its underperforming units and tacking on new market-leading segments, and with a cash hoard of $13.8 billion on hand, there's plenty of wiggle room for prospective acquisitions. The slow-growing plastics division has been rumored to go on the selling block soon to make room for new star performers.
NBC was the top broadcaster when GE bought it in 1985, and it held that position for six years. There were times in the mid-'90s when at least five of the top six shows on TV came from NBC. But times have changed, and now the network is coming back from a two-year stint as No. 3 or lower with a dearth of hit shows, thanks to strong new series such as Heroes and Deal or No Deal. Many observers believe that this exceptional show slate has saved the segment from a spinoff or outright sale.
It's a complex business with many moving parts, and it's not always easy to see where the pieces will land. Let's see whether General Electric's management still sounds as upbeat as it did last we heard from them.
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Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is good for what ails ya.
