Thursday, January 20, 2011

General Electric (NYSE: GE): Q4 Earnings Preview 2010

General Electric Co. (NYSE: GE) is scheduled to release its fourth-quarter earnings before the opening bell on Friday, January 21, 2011. Analysts, on average, expect the company to report earnings of 32 cents per share on revenue of $39.92 billion. In the year ago period, the company reported earnings of 28 cents cents per share on revenue of $41.44 billion.

General Electric Company (GE) operates as a technology, media, and financial services company worldwide. The Company’s products and services include aircraft engines, power generation, water processing, security technology, medical imaging, business and consumer financing, media content and industrial products.

In the preceding first quarter, the Fairfield, Connecticut-based company's net income was $2.06 billion, or 18 cents a share, from $2.49 billion, or 23 cents a share, in the year-earlier quarter. Earnings from continuing operations climbed to 29 cents per share from 22 cents a share in the year-ago quarter. Revenue dropped to $35.89 billion from $37.80 billion in the same quarter last year. Analysts, on average, expect the company to report earnings of 27 cents per share on revenue of $37.67 billion.  The company said it was the first time in two years that it had seen growth in both equipment and service orders.

In December, GE said that it will take an after-tax charge of $500 million in the fourth quarter of 2010 to help pay for the second phase of the Hudson River dredging project in New York. However, the company said that it would be offset by "positive items, including a favorable tax settlement." GE expects its pending sale of 51% of NBC Universal to Comcast was to close early in 2011, yielding $6.4 billion in cash. The deal is still subject to regulatory approval.

At its last earnings call in October, the company said that it expects earnings growth in its financial-services business to continue. The company also anticipates industrial revenue in the fourth quarter to grow sequentially. In addition, the company said that it plans to continue capitalizing on complementary and financially attractive inorganic growth opportunities, opportunistic share repurchases and investing in innovation as part of its capital-allocation efforts.

GE has adopted strategic imperatives to strengthen its portfolio by building strong growth platforms and generating cash from low-return businesses. Its focus remains on accelerating organic growth and achieving technical and service excellence, while building enduring customer relationships around the world. As the economy chugs along, GE expects to see rising demand across its broad portfolio, from train locomotives to medical imaging devices, to LEDs. The company also anticipates strong international growth, especially in growing markets like China and India. All in all, GE estimates sales will rise up to 5% in 2011. And the company projects to have as much as $30 billion in cash by 2013. Last month, CEO Jeff Immelt Immelt said that GE Capital may be able to pay dividends to the parent company by 2012. 

In December, Immelt also said that the company would redeem the $3 billion in preferred shares held by Warren Buffet's Berkshire Hathaway in October 2011. The shares - which Berkshire purchased in October 2008 - have a hefty 10% coupon and while retiring the shares will cost GE a premium of $300 million, it will also save the company $75 million per quarter in interest payments.

GE is also pursuing a number of strategic acquisitions, focused primarily on power generation, specifically in offshore wind and solar power plants. Energy services has been one of GE's fastest growing divisions, partly because of acquisitions. GE has said it could spend up to $30 billion on takeovers in the coming years as Chief Executive Officer Jeff Immelt renews the company's focus on heavy manufacturing after reaching a deal to sell its media unit and deciding to scale back the GE Capital finance arm. 

Recently, GE announced that it will buy privately held Lineage Power Holdings Inc. in a deal worth $520 million to tap into the growth in data centres, electronic devices and telecommunications.Lineage Power produces equipment that converts electric power back and forth from alternating current, or AC, to direct current or DC. This kind of equipment is used both inside personal electronic devices like mobile phones and also to covert electricity from the grid or from generators to power computers inside data centres, telecommunication antennae and other electric industrial equipment. GE said Thursday the market for power conversion equipment is $20 billion and growing fast.The acquisition is expected to close in the first quarter.

Last month, General Electric announced a $1.3 billion deal for U.K. energy-equipment group Wellstream Holdings PLC, as part of a move to boost the U.S. conglomerate’s presence in the oil-and-gas sector. GE said that the acquisition of Wellstream will broaden its Oil & Gas’ subsea production systems equipment and services capabilities. The deal will also allow GE to capitalize on growth in Brazil, Africa and Asia. The addition of Wellstream will particularly boost its presence in the fast-growing region of Brazil, where presalt oil-field discoveries have led to further opportunities for subsea exploration and production. GE said it can now extend its reach into floating production, storage and offloading offshore of oil and gas.

In October, General Electric announced that its GE Healthcare unit will acquire Clarient Inc. in a deal that values the cancer-diagnostics company at about $580 million.  

Recently, General Electric said that it plans to invest more than $2 billion through 2012 to boost research and development in China and fund new local joint ventures in areas such as technology and financial services. In a statement, the U.S. conglomerate's chairman and chief executive, Jeff Immelt, said the company will spend $500 million on improving its research and development operations and set up new customer innovation facilities in China. In addition, GE also pledged to invest more than $1.5 billion to fund new joint ventures with Chinese state-owned enterprises in key high-technology sectors.Early this month, GE signed a strategic cooperation agreement with the State Grid Corp. of China, the country's near-monopoly power distributor, and the Chinese Academy of Science to jointly develop smart grid standards. The three entities will cooperate in the standardization of technologies in areas including electric-vehicle charging and integration of large power-storage systems. 

In addition, the company won a $750 million contract to expand an electric power station in Andhra Pradesh, India, with gas turbines. "This will represent the largest gas turbine combined-cycle project in India's history and will help the country meet its continuing demand for reliable electricity to support its rapidly growing economy," the company said in a statement. India is the world's sixth largest consumer of energy, GE said, and its demand for natural gas has been climbing at about 6.5% a year for the last decade.

Among other developments, GE hiked its dividend  by 17% to 14 cents a share from 12 cents a share, citing a recovery at its GE Capital unit and strength in its various business units. The new dividend is payable Jan. 25 to shareowners of record as of Dec. 27. “We are able to increase the GE dividend for the second time this year because of continued strong cash generation, accelerated recovery at GE Capital and solid underlying performance in our industrial businesses through year-end 2010,” said CEO Immelt.

In terms of stock performance, GE shares have gained nearly 13% over the past year.

Full Disclosure: None.
Related Posts with Thumbnails

Wikinvest Wire