What to Focus On in Tomorrow's GE Earnings

On Friday, General Electric (GE -3.41%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever surprises inevitably arise. That way, you'll be less likely to have an uninformed, knee-jerk reaction that turns out to be exactly the wrong move.

General Electric is one of the original members of the Dow Jones Industrials (^DJI -0.41%) and has been in the average continuously for more than a century. Over that time, it has reinvented itself numerous times, most recently returning to its industrial roots and emphasizing core segments like energy. Let's take an early look at what's been happening with General Electric over the past quarter and what we're likely to see in its quarterly report.

Stats on General Electric

Source: Yahoo! Finance.

Will General Electric light up its earnings report this quarter?
Analysts have stayed pretty firm on their views of GE's earnings recently, cutting their estimates on the just-completed quarter by a single penny per share but keeping full-year 2013 views unchanged. The stock has been relatively pleased by GE's prospects, rising about 8% since mid-January.

GE has been going through a big transformation over the past quarter. The company sold off its remaining minority interest in NBC Universal to Comcast, exiting the media business and adding another $18 billion or so to GE's already impressive cash holdings. Although it plans to return much of that cash to shareholders through higher dividends and share buybacks, it expects to expand its business as well.

In particular, there are two promising areas GE might consider first for its available capital. Given GE's success in the energy arena, it was no surprise to see it already make a move to expand in that direction by buying oil services company Lufkin Industries (NASDAQ: LUFK) for $3.3 billion. With Lufkin's ability to help boost production efficiency even after initial well pressures have dropped, GE has the potential to serve its drilling and exploration customers even better.

The other potential area for buyout activity is in the mining-equipment sector, where GE has expressed interest in expanding. There, Joy Global (JOY) has been mentioned as a potential acquisition candidate, with its presence in the important Chinese market serving as a quick way for GE to get up to speed in the industry.

In its quarterly report, GE should provide valuable insight into which of many strategic directions it could move in next. No matter which way GE moves, it will have the capacity to tap into enormous growth potential throughout the industries it has targeted.

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