GE Capital Presentation, Almost An All-Clear Sign (GE)

General Electric Co. (NYSE: GE) is often hard to evaluate but if any unit will rule the roost, that is arguably GE Capital.  This continued improvement was part of our thesis when we named GE as one of ten stocks to own for the next decade.  GE also remains one of Warren Buffett’s investments with the most upside for 2011.

Mike Neal, head of GE Capital, and Jeff Bornstein, CFO of GE Capital, gave an investor presentation today that shows all the woes from 2008 to 2009 are  behind it.  GE Capital now expects a profit of $3 billion for 2010.  That compares with $1.7 billion in 2009.  More importantly, that profit is expected to rise in the next two years.  GE Capital needs no new funding from its parent.  Margins are expected to have grown to about 5% this year versus 4.6% a year ago due to lower cost of funds and due to higher volumes.

Shrinkage, the good kind in this case, is expected.  Another $17 billion is expected to be moved off the books in 2011 with core assets rising and red assets contracting.  Debt shrinkage has been seen as well.  When it comes to unit activities, GE Capital gave unit conditions as follows: Real Estate-bottoming; GECAS- improving; CLL- improving; Consumer- improving; EFS- stable.  GE Capital also noted that Europe is not a huge worry as the credit loan loss is balanced by 92% secured loans and a small enough exposure in the nations of the PIIGS.

GE shares were higher with the broad markets this morning but that strength has continued.  Shares are up 3.1% at $17.22 in above-average trading volume.  If the gains today hold up, this will mark the highest share price since October 14.

JON C. OGG