Hello, Fool! | Login | Signup | My Fool
Oct 12, 2008 10:50 PM ET | Feedback | Site Changes | Help
A diversified industrial corporation whose products include major appliances; lighting products; industrial automation products etc. Its services include product services; electrical apparatus installation, engineering, and repair and rebuilding services.
View All Commentary (GE)
Recs
mevanzzz (98.16) Submitted: 6/09/08 4:25 AM : Start Price: $29.52 GE Score: -8.27
General Electric's exposure to the capital markets often goes unrecognized. In reality GE has derived the majority of its profits from GE Capital for many years. Despite this fact, GE has outperformed most banks on a PE basis since the credit crisis began. Browsing through the "Underperform" pitches I was surprised that not one mentioned the pending possible bankrupcy of Metromedia, a corporate debtor of GE Capital. This situation may be a sign of the times, where poorly underwritten loans, originated during the debt boom of the early 2000's, may be coming home to roost. While energy conserving appliances may find a market in these difficult economic conditions, they will unlikely offset the decline in appliance sales for newly constructed homes. As such, these major business lines may see contraction over the coming year. Similarly, in the airline industry we are seeing a slow-down in orders for new planes as older planes are idled during the airline industry's race to reduce capacity. These are factors that I forsee weighing heavily on GE's earnings going forward.
Report this Post Replies: 7 | Reply
Oops! There appears to be a problem with your comment. Check to see if there's something you left out.
homein09 (68.20) Submitted: 6/26/08 4:11 PM
Recs: 0 | Rec This
I have proudly owned GE stock for many years. However, I'm deeply troubled by recent reports of GE refusing to cease doing business with Iran and refusing to take responsibility for toxic cleanups. I'm in for the money, but I also have a conscience. I'm wondering if Jeffrey Immelt has one. Also, the slide in GE stock since Immelt took over is troubling to me.
Report this Post Reply
C17goody (< 20) Submitted: 6/27/08 12:10 PM
Recs: 1 | Rec This
If you combine BOTH GE money and GE finance your still only looking at 34% of total revenue mean while the other largest maker is Infrastructure also at 34%. Although the financial stuff could be a minor problem, GE is well prositioned to benifit for many years to come whether it will be a golbal slowdown or global boom!
dkoopman (< 20) Submitted: 7/09/08 2:33 PM
If GE were simply a financial company, I would completely agree. But GE is not. With a significant portion of its free cash flow coming from its manufacturing divisions, it has an underpinning to its financial division that no bank or financial institution could ever enjoy.
mevanzzz (98.16) Submitted: 7/10/08 1:26 AM
Recs: 4 | Rec This
I understand the numbers you sourced from the 2007 Annual Report to arrive at 34% of revenues. I am talking earnings, however. What drives GE's bottom line? Since 2005, what used to be, GE Capital has provided the company with nearly 50% of its earnings. They report some of their financial services earnings as consolidated in the Infrastructure line, specifically GE Enegry Finance and GE Aviation Finance, which provide a significant amount of earnings power to Infrastructure. My numbers exclude GE Transportation Finance, which I was unable to find unconsolidated in their quarterly reports, but it's likely to be a relatively smaller component of financial earnings.Taken together, Commercial Finance, GE Money, Energy Finance and Avaition Finance have provided significant earning power over the last three years, quantified as a percentage of corporate net earnings as follows: 2005: 50%, 2006: 50%, 2007: 55% and Q1 '07: 69%, vs. Q1 '08: 62%. Note the declining YOY quarterly figures...The Q1 comparison should be an indicator of where the financial services earnings are trending, especially when taken together with the recent performance of other major financial institutions. In comparison GE's financial earnings look spectacular when compared to many of Wall Street banks' YOY comparisons. Although the firm is diversified to some extent away from financial services, how does this make sense?! They compete directly with the investment and commercial banks to put capital to work. There are write-downs coming in the not-so-distant future. These observations, taken together with the general weakness in the broader economy, lead me to believe that GE will underperform for some time to come.This quarter may prove to be an exception (they are likely to meet, or may beat expectations), but longer term I think we'll see depressed earnings from General Electric for a while to come. They will likely guide lower on Friday. Let's see what happens...Good luck Friday and happy hunting to all!!
AESpot (39.11) Submitted: 8/06/08 10:48 AM
Recs: 2 | Rec This
But unlike other banks, GE has leverage where most other banks do not. GE Capital is able to use the AAA credit rating to leverage money more cheaply; likewise, they are able to offer financing more cheaply to those they sell to, typically because of the cheaper financing as well as their prior business relationship with buyers placing orders with GE. I have put a post in the GE thread about its leveraging and how one ought to consider analyzing this company and to not necessarily put this baby in the financial bathwater. GE Capital (sans consumer finance) has been relatively conservative compared to most fo the other financial institutions that are mired in the sub-prime mess. I'll have to look at previous years for the hard numbers (particularly when I'm not working : ) ), and you may be correct with earnings; however, this earnings exposure has not always been the case nor do I think it will. It may expose some of the company to loss, but realistically, GE Energy orders have been historically high over the past 5-8 years, and they will likely continue to do so. (The sheer orders for simply wind turbines is phenomenal; this is not including gas turbines, or their recent acquisition of Spain's largest Solar panel producer). Likewise, this is not including the eventual ramping of GE Water and Processing systems (which has been selling multi-billion dollar projects, nor is this accounting for recent deals with the UAE and its the sovereign wealth fund. So, where I may agree that there is some exspoure to GE's balance sheet due to the credit crisis, I think that one really needs to take a look at where the other divisions will make up for this short fall in the foreseeable future.
ikkyu2 (99.50) Submitted: 9/19/08 12:20 AM
OK, I see your thesis. But how much are you going to mark GECS down? 80%, from where you made this pick? More? Are we to say that it needs to be unwound and that the unwinding is going to cost more than GECS has in assets, so that it takes the other half of the company down with it?Serious questions - would appreciate your opinion.
jgseattle (43.31) Submitted: 9/24/08 5:57 PM
Jack Welch just said today the the economy is going south in a big way over the next few quarters. I agree and GE is tied to the economy. If BA does not sell planes GE does not sell engines. If investment in wind slow GE does not sell turbines. And god knows when nuclear will start being bult in the US. I think GE is in for a very tough year or two an look for it to be cut in half before rebounding.
Terms & Conditions
RSS Headlines
Fool UK