General Electric Company (GE, Financial) is a diversified technology and financial services company. The products and services of the company range from aircraft engines, power generation, water processing and household appliances to medical imaging, business and consumer financing, and industrial products. It serves customers in more than 100 countries. It is a conglomerate involved with just about everything consumers come into contact with. In almost everything we do, GE plays a role in providing electrical boxes, light bulb, and appliances in our homes to providing the infrastructure to capture oil and gas, the conversion to electrical energy, and the infrastructure to support that delivery.
GE acquired a number of public and private companies to support the efforts of the company to grow the industrial business over the past year. GE has acquired companies in the aerospace, machinery, defense, oil and gas, building construction, and engineering industries (estimated total value of $466 million). It made the most publicized acquisition of Lufkin Industries Inc. (LUFK, Financial) which is currently in the works. Acquisition of Lufkin will result in market leadership and synergy benefits of GE. GE has grown the company's backlog of orders to $216 billion, including $160 billion for services and $56 billion for equipment as a part of the focus on industrials. The bolt-on deals that the company has pursued will help the company to grow its businesses.
Financials and Growth Opportunities
GE is focused on internal restructuring to reduce costs within the industrial unit by $200 million per year. GE had $90 billion in cash on the balance sheet at the end of first quarter 2013. GE has earned $1.53 per share over the past 12 months. It is expected that GE’s earnings would be $1.66 per share which would put shares at a forward P/E of 14. By the next five years, GE is expected to grow by 11%.
GE is spending billions of dollars for improvising of methods for fracking (a slang term for hydraulic fracturing) to extract natural gas. GE’s potential for reduced environmental impacts and fracking may result in returning billions of dollars to GE. A key goal for GE has been growing the company's presence in emerging and growth markets. Keeping this in mind, GE has managed to grow revenue from growth markets like the MENA region, China and Asia with orders from these regions increasing by 17% year over year. GE is increasing the profitability of the service lines, and continues to expand margins in the industrial businesses. GE Capital has become the strength of the company, whose income rose by 9% over the year. The unit continues to rebalance the portfolio and to institute new originations at higher return levels.
Good Returns to Shareholders
GE is inculcating on a number of shareholder-friendly policies thereby creating value for investors. Currently it is paying a quarterly dividend of $0.19 per share ($0.76 annually), which at this point yields 3.2%. It also increased the dividend aggressively with 5 dividend increases bringing the dividend up 90% from $0.10 per quarter to where it stands now since the 2010 dividend cut. GE has managed to return $3.9 billion dollars to investors through dividends ($2.0 billion) in first quarter 2013.
This payout forms a part of the GE’s overall strategy of returning $18 billion to shareholders this year, with $10 billion anticipated to be allocated to share buybacks and the rest allocated for dividend payouts. GE, with the execution of this buyback program, has the potential to reduce the outstanding share count to fewer than 10 billion, unlocking more value for shareholders, supportive of the company's strategy to reduce share count to between 9 billion and 9.5 billion by the end of 2015. The dividend should be able to grow in line with earnings as the share count shrinks and GE maintains the growth of EPS.
Currently the company has a dividend payout ratio of half of its earnings. The company’s CEO, Jeffrey Immelt announced that GE, in order to reduce the size of the company's finance arm, is considering an IPO or the consumer finance unit. He also suggested that this would result in the generation of excess cash excess cash in the capital unit to fund buybacks supporting the goal of reducing the share count.
To End Up With
A very important point which needs to be reiterated is that the company's strategy is very well thought out. They are dealing with the GE Capital issue, which appears to be on its way to a full recovery within the next two years. The investments are diversified across the globe and the horizon of investments is long enough to nullify some short-term risks like foreign exchange volatility.
GE is surely a stock to watch out for as far as the long-term investors are concerned, and investors should watch closely for a pullback to $23 or below to enter into a position with GE. Before the end of 2013, GE shares could rise 15%. Investors can go long with GE shares with an anticipated 10% dividend growth in the years to come. GE has not been able to achieve the highest levels of anticipated growth due to a weak European economy. It is expected that growth for the full year may come at the year end of estimates. It is strongly believed that the activities executed by GE so far this year lend themselves to success in increasing profitability and EPS in favor of investors despite of the fact that revenues may hit that lower end.
GE should experience a significant uptick in orders for both infrastructure and services as the global economy strengthens and the European markets recover. GE is committed to sustainable growth by investing in a healthier future for the investors. In the broad market, and long-term growth opportunities, the future looks bright for GE and its investors.
GE acquired a number of public and private companies to support the efforts of the company to grow the industrial business over the past year. GE has acquired companies in the aerospace, machinery, defense, oil and gas, building construction, and engineering industries (estimated total value of $466 million). It made the most publicized acquisition of Lufkin Industries Inc. (LUFK, Financial) which is currently in the works. Acquisition of Lufkin will result in market leadership and synergy benefits of GE. GE has grown the company's backlog of orders to $216 billion, including $160 billion for services and $56 billion for equipment as a part of the focus on industrials. The bolt-on deals that the company has pursued will help the company to grow its businesses.
Financials and Growth Opportunities
GE is focused on internal restructuring to reduce costs within the industrial unit by $200 million per year. GE had $90 billion in cash on the balance sheet at the end of first quarter 2013. GE has earned $1.53 per share over the past 12 months. It is expected that GE’s earnings would be $1.66 per share which would put shares at a forward P/E of 14. By the next five years, GE is expected to grow by 11%.
GE is spending billions of dollars for improvising of methods for fracking (a slang term for hydraulic fracturing) to extract natural gas. GE’s potential for reduced environmental impacts and fracking may result in returning billions of dollars to GE. A key goal for GE has been growing the company's presence in emerging and growth markets. Keeping this in mind, GE has managed to grow revenue from growth markets like the MENA region, China and Asia with orders from these regions increasing by 17% year over year. GE is increasing the profitability of the service lines, and continues to expand margins in the industrial businesses. GE Capital has become the strength of the company, whose income rose by 9% over the year. The unit continues to rebalance the portfolio and to institute new originations at higher return levels.
Good Returns to Shareholders
GE is inculcating on a number of shareholder-friendly policies thereby creating value for investors. Currently it is paying a quarterly dividend of $0.19 per share ($0.76 annually), which at this point yields 3.2%. It also increased the dividend aggressively with 5 dividend increases bringing the dividend up 90% from $0.10 per quarter to where it stands now since the 2010 dividend cut. GE has managed to return $3.9 billion dollars to investors through dividends ($2.0 billion) in first quarter 2013.
This payout forms a part of the GE’s overall strategy of returning $18 billion to shareholders this year, with $10 billion anticipated to be allocated to share buybacks and the rest allocated for dividend payouts. GE, with the execution of this buyback program, has the potential to reduce the outstanding share count to fewer than 10 billion, unlocking more value for shareholders, supportive of the company's strategy to reduce share count to between 9 billion and 9.5 billion by the end of 2015. The dividend should be able to grow in line with earnings as the share count shrinks and GE maintains the growth of EPS.
Currently the company has a dividend payout ratio of half of its earnings. The company’s CEO, Jeffrey Immelt announced that GE, in order to reduce the size of the company's finance arm, is considering an IPO or the consumer finance unit. He also suggested that this would result in the generation of excess cash excess cash in the capital unit to fund buybacks supporting the goal of reducing the share count.
To End Up With
A very important point which needs to be reiterated is that the company's strategy is very well thought out. They are dealing with the GE Capital issue, which appears to be on its way to a full recovery within the next two years. The investments are diversified across the globe and the horizon of investments is long enough to nullify some short-term risks like foreign exchange volatility.
GE is surely a stock to watch out for as far as the long-term investors are concerned, and investors should watch closely for a pullback to $23 or below to enter into a position with GE. Before the end of 2013, GE shares could rise 15%. Investors can go long with GE shares with an anticipated 10% dividend growth in the years to come. GE has not been able to achieve the highest levels of anticipated growth due to a weak European economy. It is expected that growth for the full year may come at the year end of estimates. It is strongly believed that the activities executed by GE so far this year lend themselves to success in increasing profitability and EPS in favor of investors despite of the fact that revenues may hit that lower end.
GE should experience a significant uptick in orders for both infrastructure and services as the global economy strengthens and the European markets recover. GE is committed to sustainable growth by investing in a healthier future for the investors. In the broad market, and long-term growth opportunities, the future looks bright for GE and its investors.
