Buy GE! Order Log, Valuation are at Attractive Levels - Barron's (GE)
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Price: $150.19 +1.44%
Overall Analyst Rating:
BUY (= Flat)
Dividend Yield: 0.7%
Revenue Growth %: +11.2%
Overall Analyst Rating:
BUY (= Flat)
Dividend Yield: 0.7%
Revenue Growth %: +11.2%
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General Electric (NYSE: GE) may just be the stock to charge-up your portfolio, according to a Barron's article Thursday.
Shares of General Electric are trading -- and maintaining -- levels not seen since the latter half of the 90s, making investing in the stock kind of a "roshambo" with Microsoft (Nasdaq: MSFT). But Barron's claims this isn't the case.
Previously, General Electrics Capital arm suffered from mortgage exposure, hampering General Electric as a whole. Through careful planning, divestitures, and investments, the Capital branch is shaping up and heading for positive territory.
More than that, orders are beginning to flow back in to General Electrics aviation business, Barron's says, as well as its energy business. Since prices tend to lag in these segments, now might be a time to buy before further orders at higher prices bolster General Electrics top- and bottom-lines.
With shares down about 25 percent since a 52-week high of $21.65 in mid-February, and down 15 percent since a better-than-expected earnings report in mid-July, management's forecast for double-digit earnings growth for the balance of 2011 came upon deaf ears as European ailments and a U.S. debt downgrade took the drivers seat.
The depression in shares means that General Electric is going for 11 times forward earnings, and its 15 cent quarterly dividend produces an annual yield of 3.7 percent for investors. Analysts expect General Electric to grow earnings at 15 percent rate over the long term.
Current criticism on the stock includes General Electric not making better capital-allocation decisions, not having enough in the pipeline or portfolio, and not pushing into emerging markets harder like some European competitors. Further, some believe United Technologies' (NYSE: UTX) Pratt & Whitney, ABB (NYSE: ABB), and Siemens (NYSE: SI) might be taking industrial share away from General Electric, causing General Electric's margins to shrink in the last quarter.
Another argument could be made for a change at the top. Since Jeff Immelt took the reins at the end of 2000, shares have fallen 67 percent, compared with just a 10 percent drop for the S&P 500. Some are giving Immelt credit for being dealt a tough hand. One analyst said General Electric was "over-earning" when Immelt took over, possibly running at full potential or better. The analyst says Immelt's strategies could become evident in three to five years.
Some recent acquisitions within the oil and gas sector seem like they have high multiples, but are rather in-line when compared with similar moves among peers.
General Electrics outlook also implies an R&D-to-sales of 6.5 percent, compared with an average of 4.6 percent last cycle, suggesting General Electric should be able to grow and maintain market share. Some believe General Electrics industrial margins are an inflection point, where half of it's decline can be attributed to its wind business.
The Fed is reviewing General Electric Capital's finances to determine whether the arm will be able to begin paying its parent company a dividend. Analysts expect that to happen in late 2011 to 2012, pending the U.S. economy stays firm.
With regulators aiming to keep the U.S. out of recession, orders flowing in, and shares trading at an attractive valuation, General Electric might supply some electricity for your portfolio.
Shares of General Electric are trading -- and maintaining -- levels not seen since the latter half of the 90s, making investing in the stock kind of a "roshambo" with Microsoft (Nasdaq: MSFT). But Barron's claims this isn't the case.
Previously, General Electrics Capital arm suffered from mortgage exposure, hampering General Electric as a whole. Through careful planning, divestitures, and investments, the Capital branch is shaping up and heading for positive territory.
More than that, orders are beginning to flow back in to General Electrics aviation business, Barron's says, as well as its energy business. Since prices tend to lag in these segments, now might be a time to buy before further orders at higher prices bolster General Electrics top- and bottom-lines.
With shares down about 25 percent since a 52-week high of $21.65 in mid-February, and down 15 percent since a better-than-expected earnings report in mid-July, management's forecast for double-digit earnings growth for the balance of 2011 came upon deaf ears as European ailments and a U.S. debt downgrade took the drivers seat.
The depression in shares means that General Electric is going for 11 times forward earnings, and its 15 cent quarterly dividend produces an annual yield of 3.7 percent for investors. Analysts expect General Electric to grow earnings at 15 percent rate over the long term.
Current criticism on the stock includes General Electric not making better capital-allocation decisions, not having enough in the pipeline or portfolio, and not pushing into emerging markets harder like some European competitors. Further, some believe United Technologies' (NYSE: UTX) Pratt & Whitney, ABB (NYSE: ABB), and Siemens (NYSE: SI) might be taking industrial share away from General Electric, causing General Electric's margins to shrink in the last quarter.
Another argument could be made for a change at the top. Since Jeff Immelt took the reins at the end of 2000, shares have fallen 67 percent, compared with just a 10 percent drop for the S&P 500. Some are giving Immelt credit for being dealt a tough hand. One analyst said General Electric was "over-earning" when Immelt took over, possibly running at full potential or better. The analyst says Immelt's strategies could become evident in three to five years.
Some recent acquisitions within the oil and gas sector seem like they have high multiples, but are rather in-line when compared with similar moves among peers.
General Electrics outlook also implies an R&D-to-sales of 6.5 percent, compared with an average of 4.6 percent last cycle, suggesting General Electric should be able to grow and maintain market share. Some believe General Electrics industrial margins are an inflection point, where half of it's decline can be attributed to its wind business.
The Fed is reviewing General Electric Capital's finances to determine whether the arm will be able to begin paying its parent company a dividend. Analysts expect that to happen in late 2011 to 2012, pending the U.S. economy stays firm.
With regulators aiming to keep the U.S. out of recession, orders flowing in, and shares trading at an attractive valuation, General Electric might supply some electricity for your portfolio.
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