Earnings Cheat Sheet: Pull the Plug on GE?

GE (GE) is the world’s second largest company that operates in technology, media, and financial services across the globe. GE was founded in 1892 and has had its fair share of ups and downs.

The 2008 financial crisis sent shares tumbling from about $40 to a low of $10.  Shares have currently rebounded slightly to around $17.  Shareholders also felt more pain in early 2009 when the company cut its quarterly dividend from 31 cents to 10 cents.  Since then, GE has restored its quarterly dividend to 12 cents a share.

Can GE keep its recovery going strong with Q3 earnings?

Earnings: GE reported net earnings of $2.06 billion (18 cents per share).  This was a decrease from prior year net earnings of $2.49 billion (23 cents per share).

Revenues: Decreased 5% from prior year to $35.9 billion.  Analyst were expecting around $37.6 billion, which represents a shortfall of about $1.7 billion.  The company’s finance and energy units were also down 3% and 14%, respectively.  The Street did not take the news well as shares traded down 2.2% before the opening bell.

Actual versus Wall Street Expectations: Excluding the company’s financial arm, GE managed to beat estimates by 2 cents with earnings of 29 cents.

Notable Stats: The company’s only industrial division that had a noticable profit increase was its health care business.  The health care division saw a double digit increase in profit of 14%.

Did You Hear That? CEO Jeffrey Immelt said, ” Third quarter 2010 results should give investors confidence that a renewed GE should grow earnings and dividends in 2011 and beyond.”  However, according to how the stock is currently trading, it doesn’t appear that investors have great confidence in GE, shares are currently down over 4%.

Comments: The future may be brighter for GE as they try to position themselves for future growth.  The company is in the process of selling a major stake in NBC (which had double digit profit declines) to Comcast for $14 billion.  GE is also spending $3 billion to acquire energy company Dresser, Inc.  Third quarter results did mark the second consecutive quarter of earnings growth.

However, it may be to early for investors to tell if it is sustainable.  GE is recovering from 9 consecutive quarters of decline in earnings growth.

Disclosure:  No positions.