Revisiting GE, Again

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No company, perhaps other than Microsoft Corp. (NASDAQ: MSFT), is revisited by investors for its failure to grow and prosper more than General Electric Co. (NYSE: GE). The tenure of CEO Jeff Immelt continues to be dissected, even though he may not be able to turn around a company as large and diverse as GE. The lack of progress, regardless of fault, likely will cap the increase of the firm’s stock for many more years.

GE’s shares have advanced nearly 25% over the past year, but they remain down 30% in the past five years, which is a period during which the S&P 500 has moved higher by more than 20%. By that measure, GE’s prospects are not considered much better than during the recession.

At the risk of repeating what so many observers have said, GE has restructured several times in the past five years, and the growth of its largest units has rarely been in unison. The result is that GE’s revenue was $182.5 billion in 2008 and $147.4 billion last year. Net income has fallen from $17.4 billion to $13.6 billion over that same period.

CEO Immelt continues to talk about the firm’s future, one of the cores of which is the company’s dividend. For many investors, the potential that the payout may grow and is secure are enough to hold the stock. For those who want to see a transformation of GE, there is not much promise.

One of the features in Immelt’s annual Letter to Shareholders was:

I recently returned from Sub-Saharan Africa, a region that was “off the radar” when I became CEO. Today, we are at a $3 billion annual run rate, and that could double in the next few years. GE could have “$1 billion Franchises” in Nigeria, South Africa, Mozambique and Angola. We are investing in capability and people. There are very few American companies in the region. But we could sell more gas turbines in Africa than in the U.S. in the next few years.

So what? Last year, GE revenue was flat at $147.3 billion. Earnings from continuing operations fell 14% to $17.6 billion. GE Capital once again pulled down the results of operating units. Growth of all three divisions of its core infrastructure businesses — Power & Water, Oil & Gas and Energy Management — either decelerated or dropped when the fourth quarter was compared to the previous year. This also held true for the segment operating results for the same businesses.

GE’s guidance for 2013 spooked investors enough that its shares have only risen 1% since. The S&P 500 is up almost 4% in that time. The conglomerate still has been unable to make a sale to Wall St. that its future is any brighter than its results of the past five years.