Tuesday, October 12, 2010

GE Stock Analysis

Things are looking up at General Electric (GE). General Electric is one of America's oldest and most diversified companies. The company operates in just about every market segment from industrial production to healthcare. The company stock has long been a fixture in the portfolio of dividend investors. Shares of the industrial giant were battered over the past few years dropping as low as $5 per share. The stock no longer trades in the single digits and has been slowly rising over the past two years. The company has seen its operating performance slowly improving.

Equipment orders increased 17%, including 20% growth in the Energy Infrastructure segment and 14% at Technology Infrastructure. Last quarter revenue came in at $37.4 billion which is a 4.3% decline.. Growth was positive at every division except for Technology Infrastructure which declined 11%. Things are even turning around at GE Capital. In the 2nd quarter of this year, GE Capital delivered a 93% increase in net income earning $700 million dollars. The company saw 13% growth at NBC Universal and 59% growth at Home Business Solutions.

General Electric generates massive amounts of free cash flow. The firm generated $6.3 billion in free cash flow last quarter. This is a 10% decline from last year’s $7 billion dollar intake. GE is still awaiting regulatory approval of its $13.75 billion dollar deal to sell 51% of NBC Universal to Comcast.

Earnings are on pace to come in at $1.11 for this year and $1.30 for 2011. Shares currently trade at 15.3 times earnings and 1.6 times book value. GE has seen its earnings grow 16% this year and expects double digit earnings growth for the next 5 years. The company has even increased its dividend after cutting it for the first time in the company’s history. Income investors may find GE’s stock attractive again. The stock currently has a 2.80% dividend yield.


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