 |
General Electric's Outlook Viewed As Key To 3Q Report |
|
| Thursday October 9th, 2008 / 17h14 |
|
|
|
By Bob Sechler Of DOW JONES NEWSWIRES General Electric Co.'s (GE) recent profit warning may have drained the suspense from Friday's third-quarter earnings release, but there won't be any shortage of interest on Wall Street in what the conglomerate has to say.
"The third quarter is not the point" for GE, said Brian Langenberg, principal of investment firm Langenberg & Co.
"It's going to be about what they're seeing now, and what other actions are they taking," he said. "Right now, the market assumes that everything in the world is rolling over (and dying), and people are going to want to know if that's true."
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.
Regardless, Craig Hester, chief executive of Hester Capital Management LLC, said GE's balance sheet "should be in good shape, financially speaking" as a result of the company's recent efforts to shore up liquidity.
But he noted that the broad financial crisis is hardly resolved and "credit markets are still frozen at the moment," saying he'll be looking for opinions from GE executives regarding the ongoing turmoil.
"Are there any more indications of credit deteriorating?" he said, citing a key question for GE management.
Meanwhile, the outlook for the conglomerate's industrial businesses will be heavily scrutinized as well.
Several Wall Street analysts have cut their fourth-quarter and 2009 financial forecasts for GE in recent weeks, in part because of concerns that a broad economic downturn will crimp demand for big-ticket items. GE currently is expected to earn 55 cents a share in the fourth quarter and $1.99 a share for the full year, according to the consensus of analysts polled by Thomson Reuters.
"We're going to want to know what they're seeing in the (industrial) businesses right now," Langenberg said.
When GE issued its profit warning two weeks ago, it indicated that the industrial economy had held up fairly well through the bulk of the third quarter, saying the industrial businesses remained on track for "excellent" 10% to 15% profit growth.
Since then, however, the credit crunch worsened and global economies showed signs of further slowing. Aluminum giant Alcoa Inc. (AA), which reported third-quarter results Tuesday, lent some credence to what has become a prevailing pessimism when it said a variety of sectors, such as commercial construction and aviation, have slowed.
Wall Street now awaits GE's take on the business outlook, even if analysts aren't expecting much to cheer about.
"Everybody is guessing about the future," said Ghriskey, of Solaris Asset Management. But "I would think that if (GE executives) are going to talk about the future, that they will lower expectations."
-By Bob Sechler, Dow Jones Newswires; 512-394-0285
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=VRD32MtgWpTbaoQgILdS%2Fg%3D%3D. You can use this link on the day this article is published and the following day.
|
|
| Thursday October 9th, 2008 / 17h14 |
Source : Dowjones Business News |
|
|
|
|
|
|
