How Low Oil Prices Could Impact GE Earnings
After the U.S. markets close Thursday, General Electric will report its fourth-quarter results. Shares were up fractionally ahead of the release.
Before the markets open Friday, General Electric Co. (NYSE: GE) will report its fourth-quarter results. Thomson Reuters has consensus estimates of $0.55 in diluted earnings per share on $42.12 billion in revenue. In the same period of the previous year, GE posted $0.53 in earnings per share and $40.38 billion in revenue.
GE stock had lost more than 6% of its value since January 2, though it has recovered some since. GE supplies a lot of equipment to the oil patch, particularly to the subsea segment, which has been one of the first to slow down as crude prices slide. GE posted revenues of $4.6 billion in its third quarter of 2014 in its oil and gas division, reflecting a year-over-year gain of 7%. Probably no one expects similar performance when the company reports fourth-quarter results.
Unfortunately, GE has been a whipping boy among large companies. Its conglomerate model continues to be unpopular. The argument against its management is that it has tried to run too many disparate businesses. However, the tide has turned modestly in its direction as it sells underperforming assets and presses into promising ones. Although these efforts have not lifted results much, some analysts who follow the company think they will.
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The long and short of the matter is that GE needs the international economies and oil to stabilize for it to be viewed favorably again. The conglomerate still has a massive backlog, which was recently listed as a record backlog. Imagine if oil stabilizes and if Europe, China, Russia and Brazil start to stabilize too. All of a sudden, GE might simply become the perfect company. 24/7 Wall St. has more on the outlook for GE in our bullish and bearish evaluation of GE in 2015.
At the turn of the new year, Deutsche Bank and Bank of America Merrill Lynch made mixed calls for GE. Deutsche Bank downgraded GE to a Hold rating and lowered its price target to $28 from $30. Merrill Lynch maintained a Buy rating and actually raised its price target to $31 from $29.
So far in 2015, the stock’s moving averages have been immaterial. The 50-day moving average currently reads at $25.32 and the 200-day moving average at $25.53.
Shares of GE were up fractionally at $24.14 in the first half of Thursday’s regular trading. The stock has a consensus analyst price target of $28.67, which implies an upside of 19% from Wednesday’s close. Shares have a 52-week trading range of $23.41 to $27.53. GE has a market cap of about $241 billion.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.