If you think the economic recovery is just beginning, then these 3 stocks will benefit. They've just released their earnings so you can see how they've fared even in these tough times. They all share positive attributes: plenty of cash, growing sales and earnings, and a dividend. General Electric (GE):
This stock has been a frustration for years. It cut the dividend. The price went from $38 a share to $8 from 2008 to 2009. Now it's coming back. The latest quarterly and annual reports for 2010 confirm the company's finally seeing better demand for most of its products and services.
GE mirrors the economy because it's in so many different parts of it. Here are only some of its offerings: jet engines, light bulbs, credit, mortgage finance, appliances, power plants, locomotives, electric distribution and control equipment, generators and turbines, real estate, commercial finance, aircraft leasing, NBC Universal, health care and several more. When the economy does well, so does GE.
A few highlights: Earnings were up 51% in the fourth quarter, better than expected. New orders were at the highest level since 2007. Operating margins improved by 20 basis points to 17.6%. Cash is $122.9 billion. The dividend is 56 cents a share, raised twice in the last year, for a yield of 2.80%. Forward P/E is 16. Analysts see earnings growth of 11.78% annually for the next 5 years. Company Web site: www.ge.com
Deutsche Bank just raised the price target for the stock to $22.Intel (INTC):
This has been another frustrating stock. No matter what the company announced for earnings, it never moved. Now management is doing something about it. It just announced it will add $10 billion to its stock buy back program (now at $!4.2 billion), taking stock off the market and raising earnings per share. It knows investors aren't happy with the stock performance and wants to boost the price. With all its cash ($21.88 billion), it raised the quarterly dividend to 18.12 cents, an increase of 15% over the last quarter of 2010. That's a yield of 3.4% at $21.35. The next pay date is March 1 for stockholders of record on February 7.
Intel makes semi-conductors, more of them than any one else. Earnings have grown, an average, 12.92% a year over the last 5 years. For the next 5, analysts see average annual growth of 11.80%. The stock price rallied from $12.05 in February of 2009, ran to $24.37 in April of 2010, then sank to $17.60 in August. It seems to be on the way up again.
Just released earnings were a record. For 2010, revenues were $43.6 billion, up $8.5 billion or 24%. Gross margin was 66%, up 10 percentage points year over year. Operating income was $15.9 billion, up $10.2 billion or 179% year over year. Net income was $11.7 billion, up from $7.3 billion or 167% year over year. Earnings per share were $2.05 vs $1.28, up 166% in a year. Company Web site: www.intc.comInternational Business Machines (IBM):
Big Blue has been around a long time. It used to be a growth stock. Now it's a mature money machine, growing earnings year after year. For the last 5 years, annual average earnings increased by 16.14%. Analysts see the next 5 growing by 11.48% a year, on average. But in the middle of the economic mess, November 1, 2008 to be exact, the stock dipped to $69.40 a share. The world, evidently, had ended. No one was going to buy any more information technology (IT). But they did. Now the stock is touching $160 a share.
IBM develops and manufactures IT products and services worldwide. It has software as well as hardware. It offers consulting services, systems integration and application management, storage solutions including servers, disk and tape storage systems, and microelectronics, retail store solutions, and semiconductor technology. It has a financing division that provides lease and loan financing to external and internal clients, commercial financing to dealers and remarketers of IT products, and sale and lease of used equipment. It serves financial services, public, industrial, distribution, communications and general business sectors, worldwide. The original name: Computing-Tabulating-Recording Company. It didn't have that certain ring to it. So the name was changed to International Business Machines Corporation in 1924.
Some numbers: There's $11.65 billion in cash. The dividend is $2.60 a year for a yield of 1.70%. Trailing P/E is 13.84 while the Forward P/E is 11.08. Return on Equity for the last 12 months was an astounding 64.94%. Return on assets was 10.85%. Revenues were $99.87 billion.
Should you just go out and buy these? Of course not. Investors need to investigate each one to see if it fits their risk profile and to judge if it's price is what they consider fair. But if you think there's a global economic recovery just starting, then these 3 stocks are well worth your time to research and possibly to own.
- Ted Allrich
January 25, 2011