Can General Electric Continue This Bull Run?

With shares of General Electric (NYSE:GE) trading around $22, is GE an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

General Electric is a diversified industrial, technology, and financial services company that operates worldwide. The products and services of the company range from aircraft engines, power generation, water processing, and household appliances to medical imaging, business and consumer financing and industrial products. General Electric’s segments include: Energy Infrastructure, Aviation, Healthcare, Transportation, Home & Business Solutions and GE Capital. General Electric is a leading provider of a wide range of products and many are essential in daily lives of consumers and companies around the world.  So long as economies exist, General Electric will continue to see a rise in profits by providing key products on an ongoing basis.

T = Technicals on the Stock Chart are Mixed

General Electric stock has seen a consistent uptrend since establishing lows during the 2008 Financial Crisis. The stock has been displaying higher highs and higher lows and looks poised to continue this pattern. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, General Electric is trading around key averages which signal neutral price action in the near-term.

GE

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of General Electric options may help determine if investors are bullish, neutral, or bearish.

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Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

General Electric Options

18.88%

0%

0%

What does this mean? This means that investors or traders are buying a very small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

May Options

Average

Average

June Options

Average

Average

As of today, there is an average demand from call and put buyers or sellers, neutral over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion…

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on General Electric’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for General Electric look like and more importantly, how did the markets like these numbers?

2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

17.24%

8.72%

50%

-17.14%

Revenue Growth (Y-O-Y)

-0.49%

3.57%

2.79%

2.46%

Earnings Reaction

-4.05%

3.47%

-3.41%

0.35%

General Electric has seen increasing earnings and revenue figures over most of the last four quarters. From these figures, the markets have had mixed feelings about General Electric’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has General Electric stock done relative to its peers, Siemens (NYSE:SI), United Technologies (NYSE:UTX), Koninklijke Philips Electronics (NYSE:PHG), and sector?

General Electric

Siemens

United Technologies

Koninklijke Philips Electronics

Sector

Year-to-Date Return

6.12%

-5.03%

11.43%

3.54%

8.71%

General Electric has been an average performer, year-to-date.

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Conclusion

General Electric provides a wide range of products to companies and consumers participating in an array of industries around the world. The stock has been making excellent gains in recent years but has slowed down to consolidate a bit. Earnings and revenue figures have increased for most of the last four quarters, however, investors have had mixed feelings about the recent earnings announcements. Relative to its peers and sector, General Electric has been an average year-to-date performer. WAIT AND SEE what General Electric does this coming quarter.

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