Q2 Preview: GE (GE) Quarter May Not Be Pretty, But It's All About the Long Term...


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Shares of General Electric ( GE ) are relatively quiet Thursday afternoon ahead of the company's second-quarter earnings report on Friday morning. The stock is holding under the $20 level, down about 0.5 percent to $19.74.

The Street is anticipating quarterly EPS of 37 cents on sales of $36.80 billion. The company posted first-quarter 2012 and second-quarter 2011 EPS of 31 cents and 33 cents, respectively. According to our Earnings History page, GE has been growing EPS, on average, by nearly 9 percent over the last seven quarters. The company's average sales growth has been 3.5 percent over the same period.

Shares of General Electric are up about 3 percent over the last three months, and down more than 5 percent from the 52-week high at $21 set at the beginning of July.

According to our Ratings page for GE, eight sell-side firms have Buy ratings on the stock, two have a Hold rating, and none have a Sell rating.

Analyst Commentary:

  • Goldman Sachs - Despite an inline report, the firm warned shares could be "susceptible to short-term profit taking given: (1) 740bp outperformance vs. the XLI since April 30 (GE +2.3% vs. XLI -5.1%) and (2) potential for detail of the 2Q report to be uninspiring." Goldman is also concerned with flat to down Industrial equipment orders, profit in the Aviation segment which could be flat to down, flat margins within the Energy Infrastructure segment, and any insight into "an acceleration in reserves for legacy WMC subprime mortgage liabilities disclosed in the 1Q2012 10Q that indicated claims more than doubled in 2Q through May 3."

    Even with the above concerns, Goldman said it "would view short-term weakness as a longer-term opportunity given our favorable view of GE's late-cycle exposure to Power, Aviation, and Oil & Gas, strong emerging markets position, and "social contract" story of accelerating cash return to shareholders..."

    Maintains Buy and $21.50 price target.

  • JPMorgan - Not expecting a clean beat by GE and said it would not recommend "pressing the long into the print, [but] we do not expect the GE quarter to be enough of an event to derail our thesis - GE is a best of both worlds stock, with a high quality, cash generating financial business, and an industrial franchise that holds up well in a downturn, and, if the economy is good, is positioned to outperform the EE/MI group in 2013 and beyond..."

    "In short, we think GE's quarter will not look pretty, but will be effective," according to JPMorgan.

    Maintains Overweight $21 price target.
General Electric normally reports right around 6:30am ET. Tune in to our Earnings category to get a quick-and-easy breakdown of the GE earnings within seconds of the company's release.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Earnings , Stocks

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