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  #1 (permalink)  
Old 10-02-2008, 10:39 PM
drunkguy drunkguy is offline
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Default General Electric (GE 25.89) - Update

http://www.briefing.com/GeneralConte...BargainHunting
Last Update: 25-Sep-08 13:05 ET

When reviewing the fourth quarter earnings results from General Electric (GE 25.89) in January, our concluding thoughts was that "we'd be buying the stock today."

Our position was predicated on GE's attractive valuation, its growth opportunities, its triple-A credit rating and an attractive dividend yield. As appealing as those factors might have been, the fact of the matter is that the market hasn't given a hill of beans about any of it. GE's stock is down 24% since that report.

Taking precedence have been concerns about a slowing global economy and the company's specific exposure to the credit markets through its GE Capital business. A surprising, and very disappointing, earnings miss in the first quarter that was replete with lowered guidance for the full year compounded those concerns and put the stock in the market's dog house.

The company redeemed itself somewhat with its second quarter report, but even those results weren't enough to jumpstart the stock as the credit crisis clouded investors' outlook.

Fittingly, GE cut its third quarter and full-year guidance today, citing the difficult conditions in the financial services markets.

For the third quarter, GE expects to earn between $0.43 and $0.48 per share, well short of the $0.52 consensus estimate. Full-year 2008 earnings are anticipated to be between $1.95 and $2.10 per share, which is below the consensus estimate of $2.21 and well below the company's initial forecast that earnings would be $2.42 per share.

The revised forecast didn't really come as a major surprise to the market, which had seen analysts cut their earnings estimates in recent weeks given the credit market turmoil.

The noteworthy development was the steps GE announced to strengthen its capital and liquidity position.

In an effort to highlight its commitment to its triple-A credit rating, GE made note of the following points:

1. It is increasing capital in GE Capital to reduce leverage ratios through a reduction in the GE Capital dividend to GE from 40% to 10% of GE Capital's earnings and by suspending the current GE stock buyback
2. Having already completed $70 billion in long-term funding year-to-date, GE Capital does not need to raise any additional long-term debt for the remainder of the year
3. GE Capital's commercial paper will be reduced to 10-15% of GE Capital's total debt going forward
4. It is resizing GE to deliver a 60%/40% industrial-financial services earnings split by the end of 2009

The company's board approved a plan to maintain the quarterly dividend of $0.31 per share ($1.24 annually) through the end of 2009. At its current price, the corresponding dividend yield is 4.8%.

GE began the day lower as the reduced earnings guidance prompted some knee-jerk selling interest. The stock eventually rebounded, though, in a seeming appreciation of the financial merits of its actions that underpin its appeal as a long-term investment holding.

To be sure, an improvement in the credit markets will bode well for its operations on a variety of fronts, but importantly, it will take some pressure off a core business. The slowdown in the global economy will be a countervailing force, yet the notion that the bulk of the adverse factors working against the stock have been priced in already should resonate for investment-minded individuals.

The compensation earned to wait for the turnaround is attractive. The stock's dividend yield exceeds that of all risk-free Treasury rates and, of course, there is the prospect of capital appreciation. The latter, admittedly, has been lacking for some time, but if you're looking for a multi-year investment holding, this industrial bellwether with a triple-A credit rating is as good a name as any to consider.

--Patrick J. O'Hare, Briefing.com
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Old 10-02-2008, 10:42 PM
drunkguy drunkguy is offline
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down to 22.15

that's a bit too cheap i believe
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Old 10-02-2008, 10:49 PM
Bostongambler Bostongambler is offline
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Might we see 20 tomorrow dg


Didn't Buffett throw money into this the other day.
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Old 10-03-2008, 01:06 AM
drunkguy drunkguy is offline
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yea but like I said upstairs they just bounced off a 10-year low and i hate buying stocks on a downslide

I'll wait until it stabilizes. Although I agree the price is right and it is still yielding about 5% with the dividend reaffirmed through next year

20 is a buy point for me I think. Not sure we get there though
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Old 10-03-2008, 02:21 AM
StarnetGypsy StarnetGypsy is offline
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whew! i saw it drop and was worried you hit the button already

i agree, always buy into strength!
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Old 10-06-2008, 03:35 PM
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FYI...GE reports earnings Friday
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Old 10-06-2008, 04:59 PM
Bostongambler Bostongambler is offline
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ended up .29 cents on the day
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