Lately, it seems like General Electric
Of course, investors would have liked to see something positive sooner from GE; shares have dropped by about 60% from their 52-week high. And at first, you'd think that an update that only promises to meet the low end of analyst expectations wouldn't really draw that much optimism. Yet this morning's announcement was good for a 10% pop in afternoon trading.
Let's look at some of the highlights from the update:
- With the company's finance arm, GE Capital, near the epicenter of the financial crisis, management is "taking a number of tough, but prudent actions to make GE Capital safer, stronger and more secure during this financial crisis." Those may include pumping $5 billion of additional capital into the unit.
- GE Capital's earnings will fall from $9 billion this year to about $5 billion in 2009, with its share of total GE income dropping from 40% to 30%.
- The company seeks to maintain its dividend at least through next year.
- GE will take a restructuring charge of $1 billion to $1.4 billion.
The news didn't just draw a positive response from investors. Rating agency Moody's
Of course, General Electric generates its $185 billion in annual revenue from a wide variety of businesses. As an industrial company, it has links to energy, aviation, appliances, and technology, competing with the likes of Siemens
Nevertheless, given the scope of the current credit crunch, which has adversely affected such big financial institutions as Citigroup
While GE's update left investors with plenty to be concerned about, my take is that management is adopting enough positive steps to make the company's picture brighter than it has been.
GE has been granted four stars by Motley Fool CAPS players. Why not add your rating on the big company?
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Fool contributor David Lee Smith doesn't own shares in any of the companies listed above. He does, however, welcome your questions, comments, or kibitzing. Moody's is a Motley Fool Inside Value recommendation and a Motley Fool Stock Advisor selection. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.
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