GE Looks Poised For a Bounce Back

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General Electric (NYSE: GE) is a highly diversified technology and financial services corporation, with its offerings ranging from aircraft engines, water processing, power generation, and household appliances to medical imaging, business and consumer financing and industrial products.

General Electric increased by about 22% in 2012. It outperformed the S&P 500 with strong performance of its stock in the month of September. NBC Universal exited the long-running conglomerate’s portfolio of businesses, but GE still expanded its business interests, which includes energy infrastructure, aviation, healthcare, and finance. Like many other conglomerates, GE is also betting big on emerging markets. GE expects growth from the rapid-growing economies of Asia-Pacific and Latin America, along with the boosted  industrialization of resource-rich middle-east, North Africa, and Russia.

Encouraging Financials

General Electric posted higher fourth quarter 2012 operating earnings of $4.67 billion, compared to $4.14 billion or $0.39 per share in the previous year of 2011. The net earnings attributable to GE common shareowners increased to $4.01 billion, or $0.38 per share, as against last year’s $3.73 billion, or $0.35 per share. The GAAP earnings from continuing operations were recorded at $4.3 billion, or $0.41 per share.

Quarterly revenues and other income came in at $39.33 billion, a 4% growth from $37.97 billion a year earlier, with industrial segment organic revenue growth of 4% for the quarter.

Competitors

The nearest competitors of GE are Siemens, DuPont, Honeywell and Danaher. General Electric is a huge company compared to any of these with a market capitalization of $222 billion. The market capitalization of Siemens is $95.1billion; DuPont has $43.1 billion worth of market capitalization.

Siemens AG (NYSE: SI) has been a close rival of GE. The company has performed exceptionally well over the previous years. It has also given steady returns to investors.  Siemens AG Capital Market Day was organized in London, in which acknowledged financial analysts talked about the company's impressive performance in the first fiscal quarter of 2012. The future plans of the company were also discussed in detail, most importantly regarding the innovations in the healthcare sector. Siemens looks forward to devise wide ranging plans and strategies to enhance its share in the global market. In the last year alone, Siemens has recorded an impressive income growth of a 67% while sales and revenues have also grown significantly. 

DuPont (NYSE: DD) posted earnings for the fourth quarter that were above estimates. Net sales for the company were almost at $7.325 billion. The company is giving strong performance in agriculture and food businesses, despite unfavorable currency exchange movements. For 2013, the company expects a robust performance with strong growth in crop protection driven by new products.

2013 update

The company pulled down its outlook for GE capital earning growth in 2013 to a single digit. The outlook of 2013 also comprises of $0.3 billion of restructuring in excess of gains.

Mining

This segment was one of the hot topics in 2012, when GE acquired Industrea and Fairchild. The GE penetrated through subsurface mining equipment segment through this acquisition. The management is seeking to build this business organically. The company is following the strategy of patience with this business segment.

New product launch in 2013

New products to be launched in 2013 are:

  • Silent MR- it focuses on patient comfort, near precinct noise level.
  • GE9x Engine- this new engine will support wide body aircraft, with fuel efficiency.
  • Subsea Trees- High performance, durability and simple product structure.
  • Battery Powered Shield Hauler- for mining markets, targets fuel, safety and environmental performance.
  • New BOP- sensing technology for early kick detection and capable of cutting off wells at greater depths.
  • Bio manufacturing- use in MAb therapies, cell line technology in Bio processing.
  • Power conversion- drives operating without transformers, a low cost and compact technology.
  • Mision1appliances- Horizontal axis washer & Dryer, stainless and dishwater.

Dividend raise and share repurchase

GE increased its quarterly dividend by 12% and also raised its share repurchase authorization by $10 billion. The dividend of $0.19 is payable January 25, 2013 to shareowners of record at the close of business on December 24, 2012. The quarterly dividend of the company has been increased for the fifth time in three years.

Margin Expansion

General Electric is planning to launch its new product in the market at a premium price to support margin expansion. GE posted operating margin of 14.8% in 2011. It is anticipated that this margin will rise by 30 basis points in fiscal year 2012. GE is further looking forward to, increase by 70 basis points in 2013.

Conclusion

The company has a good dividend history and dividend yield. The General Electric Company boasts of 3.34% dividend yield and a P/E ratio of 15.6. General Electric is targeting margin expansion, new product and services launch in 2013. The natural gas revolution enhanced global investment in infrastructure and low interest rate in developed countries will assist GE in driving growth in 2013. The company looks forward to invest approximately $65 million in Dayton’s Aerospace Corridor. This new facility will be the center of the company’s electrical power business.

 


valuewalk 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!

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