Before the opening bell Friday morning, General Electric (NYSE:GE) is set to report Q3 2006 earnings. The Fool is here to set a baseline for you, but here's a hint: Don't expect any surprises.

What analysts say:

  • Buy, sell, or waffle? Twenty-one analysts follow General Electric. Nineteen of them have a buy recommendation, and the other two remain at hold. In our CAPS service, 723 players and 95 all-stars are bullish on the stock, while 86 players and seven of the greats have their doubts, and GE is a three-star stock.
  • Revenues. Wall Street expects about $39.9 billion in revenue, up 7.7% over last year's $37.1 billion.
  • Earnings. The average analyst would be satisfied with $0.49 per diluted share, up from $0.43 a year ago.

What management says:
In the latest earnings call, CEO Jeff Immelt cited opportunities in the rail and energy industries, where GE provides a great deal of the infrastructure. On the downside, rising oil prices have made plastics manufacturing more expensive, and overall inflation has been a drag on results for two years. Overall, Immelt said, "we have really built the company to be a diversified company that can deliver through the cycles, so we are feeling good about the company's position in the world we see today."

What management does:
Gross margins have dropped lately due to higher cost of revenue, and the others follow from there. But revenues have continued to grow, and I think it's important to note that gross and operating income has increased every quarter, measured in dollars rather than percentages. Still, GE is famous for its quality management team, and it could prove its worth by turning this depressing margins trend around.

Margins %

3/05

6/05

9/05

12/05

3/06

6/06

Gross

39.6

39.9

39.9

39.2

38.8

38.7

Op.

15.3

16.2

16.3

15.8

15.8

15.8

Net

13.0

13.7

13.8

11.0

11.0

10.9


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:
GE is operating with a very clear diversification strategy, meant to take risk out of the business and provide a stable platform. It's the same business model as Otter Tail (NASDAQ:OTTR), albeit on a much larger scale and based on industrial manufacturing rather than power generation. When plastics and jet engines are doing poorly, NBC and medical imaging can make up for that, and so forth. The company's six major divisions provide security beyond almost any investment you can think of, with a 2.8% dividend yield to boot.

GE likes to keep the analyst community fed with outlook updates, which together with the stability I mentioned means that any bottom-line result more than a penny away from the consensus would be a downright shock. Expect in-line earnings and revenues Friday, in other words, and tune in to the conference call for the real meat on where the business is heading.

Competitors:

  • Citigroup (NYSE:C)
  • Koninklijke Philips (NYSE:PHG)
  • Siemens AG (NYSE:SI)
  • ABB (NYSE:ABB)
  • United Technologies (NYSE:UTX)

Otter Tail is a Motley Fool Hidden Gems pick. Check out a free 30-day trial to see why Bill Mann likes this tiny conglomerate.

Fool contributor Anders Bylund holds no position in any of the companies discussed here, but he's one of the GE bulls in CAPS. You can check outAnders' holdingsif you like, and Foolishdisclosureis good for what ails ya.