With earnings season well underway, investors have now gotten to digest earnings reports from the second quarter in the three major conglomerates. General Electric Co. (NYSE: GE), 3M Company (NYSE: MMM), and United Technologies Corp. (NYSE: UTX) had some very common themes, but they also have unique situations which have changed their outlook and investor bias ahead.
24/7 Wall St. wanted to conduct a review of the reports and the reactions on GE, 3M and United Tech to see which offers the best value ahead. It turns out that there may be a clear winner here this time after value investors filter out the noise.
Additional commentary from each company’s CEO has been added in for an overall flavor of how each company was communicating their results to their respective shareholders.
General Electric Co. (NYSE: GE) reported adjusted diluted quarterly earnings per share (EPS) of $0.28 on revenues of $32.75 billion. In the same period a year ago, GE reported EPS of $0.32 on revenues of $32.26 billion. Second-quarter results also compare to the consensus estimates for EPS of $0.28 on revenues of $28.7 billion.
Revenues in the oil and gas segment in the quarter were down 15%, but that was offset by an 8% increase in power and water segment revenues. Overall, industrial segment revenues were flat at $33.09 billion. As a reminder, GE remains in the 24/7 Wall St. 10 Stocks to Own for the Next Decade. This is due to its changes taking place and the desire to move to less and less financial influence over the company. GE’s restructuring and spin-off of Synchrony Financial (NYSE: SYF) keeps it in the special situations classification as of now.
Shares of GE were recently at $25.70 versus a 52-week trading range of $23.41 to $28.68, and this is versus closer to $27 before earnings. The stock has a consensus analyst price target of $30.15, plus GE has the highest conglomerate dividend yield at 3.6% — leaving implied upside of 20%.
3M Co. (NYSE: MMM) reported its second-quarter financial results before the markets opened on Thursday. The company had $2.02 in EPS on $7.7 billion in revenue. That compared to Thomson Reuters consensus estimates of $2.00 in EPS on $7.83 billion. In the same period of the previous year, it posted EPS of $1.91 and $8.13 billion in revenue.
Organic local-currency sales grew 1.8%, and foreign currency translation reduced sales by 7.3% year over year. Operating income margins for the quarter were 23.9%, up 1.1 percentage points from the same period last year.
The company updated its guidance for the 2015 full year. Now 3M expects EPS will be in the range of $7.80 to $8.00, versus a prior range of $7.80 to $8.10, and that foreign currency translation will reduce 2015 sales by 6% to 7%. The consensus estimates are $7.90 in EPS on $31.14 billion in revenue for the 2015 full year.
3M shares were last trading around $149.00 on a 52-week trading range of $130.60 to $170.50, but 3M shares were closer to $155 last week ahead of earnings. The stock has a consensus analyst price target of $168.23, so its 2.7% dividend yield leaves an implied upside of almost 14%.
United Technologies Corp. (NYSE: UTX) acted as though it stubbed its toe after earnings. Despite selling off Sikorsky helicopter unit, shares fell from $110 down to under $100, and the post-earnings reaction was represented as being the worst drop since 2001. Still, UTC is taking aggressive measures to accelerate cost reduction across its businesses and looking for additional structural cost actions that can drive earnings growth well into the future. As a side note United Technologies also mentioned that it will look to deploy additional capital for share repurchases and M&A.
United Tech had $1.81 in EPS on $16.3 billion in revenue compared to consensus estimates of $1.71 in EPS on $16.66 billion in revenue. The same period of the previous year had $1.85 in EPS on $17.19 in revenue.