Another Solid Quarter for This Conglomerate
Daniel is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In my last post on General Electric (NYSE: GE), I highlighted the company’s history of strong earnings, as well as its size and competitive edge. Always on the lookout for reliable and stable blue-chip companies, I find myself returning to this manufacturing giant which seems to make money regardless of the macro-economic climate. Although it has at the time of writing failed to excite the market much, GE has delivered another quarter of strong results. In this article I will give a run-down of the latest report.
Q4 2012 Earnings Report
Q4 EPS came in at $0.44 beating the consensus by a penny, and revenue was up to $39.3 billion beating by about $0.59 billion. Earnings are up 13% compared to this same period a year ago, which represents the eleventh consecutive quarter of strong growth. Five of the seven industrial reported impressive double-digit earnings growth and all industrial segments reported positive growth for the second consecutive quarter. All industrial segments reported an increase in margins, and the company is currently facing its largest backlog ever, currently at $210 billion.
Management generally seemed pretty pleased by the results, and although the company is still experiencing some difficulties in developed markets, it is seeing strong growth in China and the resource-rich countries such as Russia and Australia. GE’s research and development strategy currently seems focused on delivering greater fuel efficiency, which has resulted in the introduction of new power plant technology and a prototype locomotive among other products. All in all, CEO Jeff Immelt is very optimistic going into 2013.
Cash generated from operating activities rose an impressive 48% to $17.8 billion, with industrial segments contributing $6.2 billion. The company ended the quarter with a comfortable $77 billion in cash. Over 2012, GE returned $12.4 billion to shareholders in the form of dividends and buybacks. In December, the company raised the dividend for the third time in five years.
Valuation and Metrics
GE’s valuation has gotten a little cheaper since I last wrote about the company, so it may be worth a fresh look. The company now trades at 16.86x earnings and only 12.75x forward earnings. The TTM P/E is slightly higher than the industry average, but the price to sales and price to book are both quite inexpensive at 1.57 and 1.82. While GE has few competitors of its size to compare its valuation with, Siemens (NYSE: SI) comes fairly close in terms of size and diversification. Siemens trades at a comparable 17x TTM earnings, but with a slightly higher forward P/E of about 15x. Price to book is also higher at around 2.4. All in all, both companies seem valued more or less in line with the industry.
It appears as if GE has managed to deliver another quarter of strong earnings growth, and moreover, management is confident about the company’s prospects in the time to come. Especially developing and resource-rich markets are seen to offer growth potential. Additionally, the company has a strong cash position and has raised dividends this quarter, which makes it a compelling choice for dividend and value investors.
DUJames has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!