Will GE Change Its Tune On Annual Outlook? (GE)

December 9, 2007 by Douglas A. McIntyre

General Electric has its upcoming investor ANNUAL OUTLOOK meeting on Tuesday, December 11, 2007, and this will be an event to watch.  The meeting will begin at 3:00 PM EST and we’ll get to see some of its forecasting ahead.  Last Monday, First Call’s consensus for 2008 was pegged at $2.50. It now appears that First Call has 2008 consensus set at $2.49.

There were some key analyst calls this last week ahead of Tuesday’s event, although these are very short summaries and other reports may have been issued:

  • Last Monday Citigroup maintained its Buy rating but actually lowered some of the 2008 earnings per share targets down to $2.45 from $2.50 and took its price target down to $45.00 from $48.00.
  • On Wednesday, Deutsche Bank also maintained its buy rating, but slightly lowered estimates and took its $47.00 price target down to $44.00.
  • Lehman reiterated its "Overweight" rating on Thursday but took its target down from $48.00 to $45.00.

The good news is that the bar has been lowered.  The bad news is that the negative sentiment has crept into the stock as General Electric won’t be entirely immune from what is almost a certainly weak US consumer in 2008 despite strength in international orders, airline engines, power stations and other areas.   GE’s stock chart is also under pressure now that it broke under and was unable to stay above its 200 day moving average ($37.79) for a second time.  That adjusting level may act as some larger resistance the second time around.  Shares were challenging $42.00 just two-months ago.

We are still impressed that the company thinks of itself as a growth company with plans for 20% return on capital.  That isn’t a mandatory target every single quarter nor likely is it a firm commitment every year, but it’s still impressive for a company worth $376 Billion in market cap.

So the bar has now been lowered.  We’d also expect more of the same from analysts lowering price targets or earnings per share targets on Monday and Tuesday ahead of the event.  They don’t always act in unison, but the pack mentality seems more frequent than coincidental.

Jon C. Ogg
December 9, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.