Foolish Forecast: American Problems Won't Bother GE

"Two roads diverged in a wood, and I --
I took the one less traveled by,
And that has made all the difference."

-- From "The Road Not Taken" by Robert Frost

Megaconglomerate General Electric (NYSE: GE) reports first-quarter earnings on Friday morning. How is this ultimate blue chip holding up in a weakening American economy? Have a look at last quarter's results, and then come back here for a fresh update.

What Fools say:
Here's how GE's Motley Fool CAPS rating stacks up against some of its peers and competitors:

Company	Market Cap (Billions)	Trailing P/E Ratio	CAPS Rating (Out of 5)
GE	$368.8	16.6	****
United Technologies (NYSE: UTX)	$70.4	16.8	*****
Walt Disney (NYSE: DIS)	$58.5	14.9	****
3M (NYSE: MMM)	$56.3	14.3	*****
Time Warner (NYSE: TWX)	$52.7	13.7	***

Data taken from Motley Fool CAPS on 4/9/08.

Our CAPS players like GE for plenty of reasons, but there's a common thread going through their recent comments. Let's see whether you can spot it:

• "Solid company."
• "Blue chip buy and hold."
• "Household name."
• "generalELECTRCWHAT THE [Niflheim] IS THERE 2 THINK ABOUT"

Got it? Good. The bears, meanwhile, see GE being outmaneuvered by smaller, more nimble competitors and thwarted by economic stagnation.

What management does:
There are two obvious points of interest in these data. First, revenue and income growth look generally stronger over time, with the caveat of a downtick in the latest period. Second, free cash flow has exploded, and GE is coming up on a very easy comparison this time, since last year's first quarter was virtually breakeven, with a $37 million FCF take. Compare that to last quarter's $11.6 billion, and you'll see how big the jump should be.

Margins	9/06	12/06	3/07	6/07	9/07	12/07
Operating	15.7%	15.6%	15.1%	15.4%	15.1%	15.2%
Net	11.7%	13.8%	12.8%	12.7%	12.7%	13.1%
FCF/Revenue	10.1%	9.8%	7.0%	10.8%	11.1%	16.5%

Y-O-Y Growth	9/06	12/06	3/07	6/07	9/07	12/07
Revenue	13.1%	10.9%	11.1%	14.6%	16.8%	13.4%
Earnings From Continuing Operations	5.9%	11.7%	11.8%	16.9%	18.7%	15.9%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
A month ago, confident in the company's ability to weather any domestic turbulence, management issued a 10% revenue-growth goal for 2008. It also committed to investing $5 billion in emerging-market infrastructure projects through 2010. That increasing global focus fuels GE's immunity to local downturns.

As always, you shouldn't expect any major surprises from this colossus from quarter to quarter. It's better to judge the massive machine from a long-term perspective, and it's hard to find a bluer chip in this neck of the woods -- or any other, for that matter.

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