Hard Times, But GE Looks Like a Safe Harbor (GE)

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General Electric Co. (NYSE: GE) has posted its awaited earnings report and the giant conglomerate posted earnings of $0.45 and revenue of $47.2 billion.  First Call had earnings of $0.45 and $47.34 billion in revenues, and its earnings guidance was $0.43 to $0.48 per share.  The company also said it will maintain its $1.24 annual dividend through 2009.

There were some key highlights: Industrial segment earnings were +12%;Financial services earnings were $2.0 billion; Infrastructure orderswere +9%; Commercial paper was $88 billion.  Energy Infrastructure ledthe quarter with a 31% increase in segment profit.  NBC Universal grewsegment profit 10%.  Technology Infrastructure grew segment profit 2%.

Here is what is important for the future. GE’s total orders backlog has grown by 20% and now stands at a massive $170 billion. According to our data, that backlog represents almost an entire year’s worth of revenues.

While GE did not give detailed guidance, CEO Jeff Immelt noted that thecompany is "on track to meet our September 25 revised guidance for thefull year…".  The company did note that its 2008 total earningsshould be about $20 billion.

Here is the key issue at GE, and this may differ from what you readelsewhere.  Many of these segment numbers are contracting and thecompany is taking wider loss provisions by another $500 million.   Butthese figures are still very much in-line with what the company forecasted on September 25.  It is also a position where the company isnot signaling a massive blood-letting or a massive defection with ordercancellations.  The fact that it still made a profit in financial services is paramount and underscores that there is still an ability to generate profits in hard times.

In today’s horrible stock market, GE’s numbers are actually a win andgood enough to offer some stability for the markets which have been infree fall.  It is impossible to know where this will trade today aftersome overseas markets fell 10% to catch up to the U.S.  But all in all,this should offer at least some stability.  The company has even notedthat it might use its capital to be aggressive in the long-term,another sign that Immelt and friends aren’t preparing to jump into theabyss.

We’d expect that the debt ratings agencies will come out and issuereaffirmations of GE’s key "AAA" debt rating based on the stability ofthe overall business operations in these troubled times.

Shares closed down 7.9% Thursday at $19.01, the lowest share price forGE this entire decade. m So far shares are indicated up about 1% withunder 3 hours to go before the open.

Jon C. Ogg
October 10, 2008