It’s time to revisit an iconic industrial name. Here is the breakdown on $GE, otherwise known as General Electric.
Current Price: $13.60
52/Wk High: $14.13
52/Wk Low: $5.48
Market Cap: $119.2 Billion
Read below for the breakdown!
General Electric ($GE) is a major industrial company with core business stemming from the aviation, healthcare, and power industries.
Breaking down the stock price by segment according to TREFIS (@trefis) data, 52.22% of General Electric’s stock price is based on the Aviation segment.
Furthermore, 32.34% of the stock price is on the company’s Healthcare segment, 8.55% their Power segment, 5.89% represented by the GE Capital segment, and finally 0.99% of the stock price is based on the Renewable Energy segment.
Given the dropping COVID-19 numbers and economic comeback, General Electric’s stock has been hot in the last few months, rallying a strong 25% in just the last three months.
Digging into the numbers GE missed Q4 2020 expectations with an EPS of $0.08, just short of the analyst’s EPS consensus estimate of $0.09. On a year over year basis, EPS declined by a disappointing -61.90%.
Revenues also continued to fall short, dropping 16% year over year to $21.9 billion on a GAAP basis. On the flip side, revenues increased over the previous quarter, Q3, revenues of $19.4 billion.
Total orders also fell throughout the quarter, dropping 7% year over year to $23.2 billion. Both the decline in total orders and total revenues management attributed to a difficult macro environment.
On a positive note, industrial profit margin improved, landing at 14.4% on a GAAP basis, representing an increase of 800 basis points in profit margin.
As for the full year, revenues declined by 16% to a weaker $79.6 billion along with a decline in total orders of 20% to $72 billion.
While both FY 2020 revenues and orders declined, General Electric managed to improve industrial profit margin on a GAAP basis by 790 basis points to 10%, a major goal new management had previously set.
Management was upbeat about the quarter.
“As 2020 progressed, we significantly improved GE's profitability and cash performance despite a still-difficult macro environment,” CEO Lawrence Culp said.
When it comes to guidance, management is predicting low single-digit industrial revenue growth throughout 2021 and an improvement in industrial profit margin by 250 basis points in FY 2021.
Shifting into the balance sheet the numbers could be better.
Total Debt: $75.066 Billion
Total Liabilities: $217.901 Billion
Total Assets: $253.452 Billion
Cash & Short Term Inv: $43.949 Billion
On a valuation basis, $GE does trade at a premium.
Price to Earnings: 22.74x
Forward Price to Earnings: 27.76x
Price to Sales: 1.49x
Price to Book: 3.35x
Price to Cash Flow: 8.14x
Management has been effective.
Return on Equity: 16.40%
Return on Assets: 2.21%
Return on Invested Capital: 3.01%
Given the numbers, the analysts are neutral with a mean price target of $12.93/share, representing a -4.93% loss.
The high price target is $17.00/share, representing a 25% gain, while the low price target is $7.00/share, representing a -48.53% loss.
The big money is also quite involved with 62.01% of General Electric being owned by institutions. Top holders include T. Rowe Price Associates, The Vanguard Group, and Fidelity Management & Research.
On a technical basis, $GE is bullish. According to the six-month charts, the MCAD is moving to the upside with significant momentum within a range of 0.5759 down to 0.4571.
The six-month charts are also indicating an RSI of 70.92 and CCI of 116.21, both of which are on the high end.
In short, General Electric is a solid industrial name with strong new management, recovering earnings, and a recovering economy to grow into.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply an opinion based on independent research.