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TMFDeej (99.47)

GE's Results: The Market Hates 'Em, but I Love 'Em

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18

April 11, 2008 – Comments (7) | RELATED TICKERS: GE , CBI , FLR

I am not currently nor have I ever been a share holder of General Electric.  However, one can often learn a lot about how other companies' earnings results will look by checking out the results of monster companies, like Walmart, GE, etc...  The market obviously does not like the results of GE's first quarter, which it announced this morning.  Its stock is down more than 11% in pre-market trading as I write this.  I personally am not shocked that it had a rough quarter.  GE has the United States' seventh largest financial company in its stable of businesses.  Anyone who didn't know that financials had a rough Q1 has been living under a rock.  I guess that Mr. Market doesn't like the fact that GE missed even though it usually does a good job at hitting estimates.  Perhaps they should have pre-announced.  Who knows.  What I do know is that outside of financials, some of General Electric's other businesses are rocking.

I have been writing about and personally investing in infrastructure, particularly energy infrastructure a lot lately.  In its press release GE said "Demand for our global Infrastructure business remained strong."  During the Q1, GE's Infrastructure revenue rose 23% and its earnings for the segment rose 17%.  If you drill down a little further, so to speak ;), within the infrastructure results, you can see that the company's oil and gas segment is doing great. GE's revenue for "Oil and Gas" section of its infrastructure unit rose 34% and its quarterly earnings rose 58%!  About this subsegment, GE said "Oil & Gas, Energy, Transportation, and Aviation all generated double-digit profit growth – with no signs of slowing."

I don't know what the market will bring us with a lot of these companies today.  Overall the futures are getting hammered right now.  If companies that are involved in infrastructure, particularly energy infrastructure, like CBI, FLR, and MDR do fall today I personally believe that it will be an excellent buying opportunity.

GE's First Quarter Press Release

Deej

Long CBI, FLR, MDR

No position in GE

7 Comments – Post Your Own

#1) On April 11, 2008 at 10:29 AM, bellard (99.44) wrote:

"I have been writing about and personally investing in infrastructure"

I have been investing in this area for the past year. Natural gas is another of my current overweights. GE's result are not surprising - health care, financials, and appliances down, ROW infra up - this is old news. GE stock should have been down earlier like the home builders and banks...... 

 

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#2) On April 11, 2008 at 10:33 AM, Gemini846 (89.64) wrote:

Nice summary. I agree that this could create a nice buying opportunity. Most of the earnings miss was a result of GE's financal component.

I'm trying to sumarize a theory right now as to why the market has responded across the board violently to a 1 company hit or miss (AAPL yesterday and GE today) even in sectors that aren't affected. I think it has a LOT to do with ETF rebalancing and other managed funds being forced to buy junky stocks to avoid overexposure to one solid large cap. This forces a semi-upward spiral inducing a broad rally (or selloff). Why else would home builders respond positivly to tech numbers. What do you think?

As far as CAPS goes nothing like having a bunch of shorts and the market tanks a point giving your score 150 points worth of deficit to make up.

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#3) On April 11, 2008 at 11:41 AM, Gtrinvestor (99.88) wrote:

Nice insights into the GE earnings release.  This is the sort of under the covers stuff I like to read about from CAPS, rather than the obvious stuff you can gather from the headlines.

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#4) On April 11, 2008 at 2:42 PM, mandrake66 (95.06) wrote:

I'm trying to sumarize a theory right now as to why the market has responded across the board violently to a 1 company hit or miss (AAPL yesterday and GE today) even in sectors that aren't affected. I think it has a LOT to do with ETF rebalancing and other managed funds being forced to buy junky stocks to avoid overexposure to one solid large cap. This forces a semi-upward spiral inducing a broad rally (or selloff). Why else would home builders respond positivly to tech numbers. What do you think?

Since Bear Stearns' collapse there hasn't been much to go on for how the economy was really going. The unemployment numbers about a week ago were one of the few real indicators. There was a real tug-of-war between bulls and bears -- sky is falling vs opportunity of a lifetime, with no lasting momentum either way. This uneasy peace was going to last until earnings started to be reported, and GE is an especially important one. It's huge, pretty well-run, and diversified across the board by industry and geography. So when it misses by a hefty margin, that pretty much clinches it.

As for the homebuilders, they were responding positively to corruption in the Senate; nothing to do with tech.

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#5) On April 11, 2008 at 3:33 PM, DemonDoug (98.84) wrote:

deej, i generally agree, both about infrastructure and about GE.

My preferred way to play infratructure however is oil.  (Guess where asphalt comes from?)  Since you are also bullish on energy and oil Deej I don't need to explain why, but you need fuel to power the infrastructure building efforts.  Until CAT makes a solar powered backhoe, I doubt we're going to see a drop in oil with all the infrastructure needs.

Gemini: there is a lot of sector rotation going on right now.  Tobacco, for instance, has been pounded down quite a bit and I believe also presents a buying opportunity (I put my money where my mouth is on that one as I picked up more shares of PM today).

I agree with mandrake on both the HB's and earnings.  GE usually meets or exceeds expectations, so coming in below expectations is a bellweather signalling that many companies may not be meeting their targets, creating the selling today. 

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#6) On April 11, 2008 at 5:42 PM, abitare (99.43) wrote:

FYI from: http://globaleconomicanalysis.blogspot.com/ 

My Comment: With that, GE admits what many of us knew already. GE, like GM is not a manufacturing company. Both are finance companies loaded to the gills in debt. The difference between the two is GM has subprime products and subprime debt while GE has arguably higher qualities of debt and products.
The market turmoil also prevented GE from selling some finance assets, Immelt said. GE put its U.S. credit card business and Japanese consumer finance units up for sale last year. The health-care unit also trailed expectations.My Comment: Let's see if I have this straight. GE put financial assets up for sale last year, had no takers, but the Bear Stearns problem a month ago is the cause of all its woes. GE missed its forecast for the commercial finance unit. That cut per-share profit by 5 cents and resulted in a lowered full- year forecast of $2.20 to $2.30 a share, down from the previous forecast of at least $2.42. Immelt had told investors in December that $2.42 a share was "in the bag."
My Comment: Papa's got a brand new bag.

 

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#7) On April 12, 2008 at 12:48 AM, dwot (99.57) wrote:

GE sell crap.  I refuse to allow GE products in my home.

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