Earnings Preview: General Electric Q2 2007 (GE)

Tomorrow morning, we should get the second quarter earnings results for General Electric (NYSE:GE).  The estimates are $0.52 EPS and $41.7 Billion according to First Call.  GE frequently gives guidance, so here is the guidance: Q3 EPS $0.55 and revenues $43+ Billion; Fiscal 2007 EPS $2.21 and revenues in the vicinity of $174 Billion.  Last quarter, CEO Jeff Immelt gave ex-items guidance of $0.52 to $0.54Q2 EPS (up 8% to 13% from Q2 2006) and $2.18 to $2.23 Fiscal 2007 EPS(up 10% to 12% from Fiscal 2006).

GE is the largest conglomerate with a $393+ Billion market cap, so it usually takes quite a large piece of news to move the stock widely in any single direction.  Many are mixed on the stock and some have called for far more aggressive action, including a break-up.  Personally, I am in the camp that General Electric should stay together and if they want to ‘unlock value’ that it should be done via the old tracking stocks and only partial divestments rather than a true break-up.  It took more than 100 years to put this together, and any short-term calls for any significant changes to the business model would probably be applicable only to the current market conditions. 

As it stands today in late-afternoon trading, it does not look like options traders feel GE is going to move more than 1.5% to 2% in either direction.  This is subjective because the stock is between option contract strike prices and options expire next Friday.  The stock chart is also a mixed picture as shares just hit new 5-year highs last month and failed to stay.  This chart may be resting more on the fundamentals, but with the resurgence of mega-caps and the market strength it just seems too hard to expect any real negative report.  We’ll know in the morning.  The average price target for analysts with Buy/Outperform ratings on Wall Street looks to be between $42.00 and $43.00.

Here is a link to the company conference call set for tomorrow morning and keep in mind that GE’s security analyst meeting regarding technology on July 23.  GE also issued its last earnings on a Friday the 13th, and shares closed up $0.20 on that day.  GE shares are up roughly 10% since its last quarterly earnings report.

Jon C. Ogg
July 12, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.