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A technical Analysis for General Electric Q3 earnings: What went wrong?

By Amarendra Bhushan for CEOWORLD Magazine Updated:October 10, 2008

I think GE’s greatest strength and weaknesses is in their higher levels of management. The businesses are great on accountability, metrics, efficiency, and other areas. GE is too big, too slow, too leveraged and too anti-customer to make it in the 21st century. But, from an accounting stand point they seem to be efficient however inside they were anything but… for this reason I do not, and have not been a holder of GE stock.

Before the General Electric Co., which makes everything from jet engines to water treatment systems and owns NBC Universal, Q3 earnings report, futures were already sharply lower amid a worldwide equities sell-off on mounting fears that the widening fallout from the credit slump will tip the global economy into recession. But stock index futures briefly added to losses on Friday after General Electric, a diversified manufacturer and a Dow component, posted quarterly results.

Revenue rose 11 per cent to $47.2 billion. The global industrial, finance and media conglomerate said today that its board has resolved to maintain the dividend at $1.24 per share at least through next year. Excluding acquisitions, organic revenue growth was three per cent.

The per-share profit of 45 cents was down 10 per cent from the third quarter of last year, pulled lower by GE’s financial services segment. Chairman and CEO Jeff Immelt said the infrastructure and media businesses “continued to see signs of strength,” with a 31 per cent profit increase in energy infrastructure and a 10 per cent rise at NBC Universal.

GE’s revenue totaled $47.23 billion, up 11 percent. Analysts polled by Thomson Reuters forecast earnings of 45 cents a share on revenue of $47.34 billion. Results were dragged down by a 33 percent profit decline at its capital finance business.

GE is considered a barometer for the global economy, since it has businesses that make a range of goods from light bulbs to aircraft engines. It also lends money to finance everything from commercial real-estate projects to purchases of industrial equipment.
Last week, General Electric raised $12.2 billion through a stock offering to help shore up its balance sheet and protect itself in case the market for short-term commercial paper runs into further trouble. The company also got a $3 billion infusion from Berkshire Hathaway, the investment vehicle of billionaire Warren Buffett.

Timothy Ghriskey, chief investment officer at Solaris Asset Management LLC, concurred, saying GE’s status as something of a bellwether will be particularly important in this quarterly report. With far-flung operations ranging from health care and media to big-ticket items such as aircraft engines and wind turbines, the Fairfield, Conn., behemoth has often been looked to as an economic barometer.

“GE reflects big parts of the global economy, so it will be interesting to see what their recent experiences are and certainly their outlooks” on various aspects of it, Ghriskey said. “The earnings right now probably don’t make all that much difference.”
GE warned two weeks ago that its third-quarter earnings would come in at 43 cents to 48 cents a share, off from a July forecast of 50 cents to 54 cents a share. The company also reduced its full-year forecast to a range $1.95 to $2.10 a share from a previously lowered $2.20 to $2.30. The change translates to as much as $2 billion less in profit for 2008.
At the time, GE blamed the bulk of the reductions on efforts to shore up its beleaguered financial arm, GE Capital, which accounts for about half of its earnings. GE also froze its dividend for the first time since the 1970s and suspended its share-buyback program
Since then, GE moved to raise $15 billion by issuing new shares, including $3 billion in preferred shares to Warren Buffett’s Berkshire Hathaway Inc. (BRKA,BRKB).

GE, trading recently around $20.24 a share, off 2% from Wednesday’s close, has been pummeled by investors, primarily because of fears regarding the fallout from the financial-market turmoil and credit crisis on GE Capital. The stock is off about 45% for the year and 28% since the start of September. The company also suspended its buyback plan, and said it will reduce commercial paper to 10% to 15% of total debt. General Electric made news recently when on October 1, the company announced plans to offer at least $12B of common stock to the public. In addition, the company announced that it has reached agreement to sell $3B of perpetual preferred stock in a private offering to Berkshire Hathaway.

GE is under attack from the Global shorts (Oil $) and as a MAJOR US defense contractor it is just one of the most visible companies in what I am now calling the (FIRST) ECOMONIC WORLD WAR or EWW 1.

Get ready to discover many strategic US companies that are getting ripe for foreign takeover UNLESS SHORT TRADING IS HALTED ASAP BY THE SEC, like yesterday. Imagine if Boeing was owned by India or China or Russia!

Maybe the SEC should ban any form of selling??

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