General Electric is the largest conglomerate in the world which divided into five reporting segments: Energy Infrastructure, Technology Infrastructure, NBC Universal, Captial Finance, and Consumer & Industrial. In 2009, GE is ranked as #1 largest company in the world by Forbes.
1q09 results (vs 1q08)
1. Revenue down 9% to $38.4B
- Overall, revenue is in line with my expectation;
- Energy segments up 7% to $8.2B, one of the strongest segment with special thanks to government focus on green energy at the same time cannot get oil energy away;
- Technology same to $10.4B, should do ok even in tough economy environment;
- NBC down 2% to $3.5B, pretty good in today's advertisement cutting situation;
- Finance down 23% to $13.1B, expected to be bad;
- Conusmer down 19% to $2.2B
- If one compare 4q08, it down significantly in all segments by 17%, but GE's business is seasonal, that's why I don't bother to show the comparison;
- Overall net margin down 29% to 8%;
- Exclude tax benefit, GE is actually having a loss in 1q09;
- Energy (margin before tax & financial expenses) up 12% to 16%
- Technology up 6% to 17%
- NBC down 44% to 11%, for sure it is due to lower adv, but why only drop in profit instead of sales? Its press release plus the presentation & stat supp are just not clear enough on this kind of quantitative info;
- Finance down 46% to 8.5%, it is in line with forecast and better than analysts' expectation.
- Conusmer down 68% to 1.6%, crazily low, but it is immaterial to the bottom line. The question is: should GE keep this segment or it should sell it ASAP?
- In GECS, consumer delinquency up 10% to 8.2% from 4q08. Equipment delinquency up 31% to 2.84%, up a lot, but still in line with my expectation;
3. Balance Sheet
- Total equity down 13% to $101B from 1q08 and down 4% from 4q08;
- Cash in GECS up 55% to $87B from 1q08 and up 11% from 4q08;
- Borrowing in GECS down 8% to $493B from 1q08 and down 4.2% from 4q08;
- Adjusted leveage rate in GECS down 19% to 6.0 from 1q08 and down 16% from 4q08. You can see GE took some actions to strengthen its balance sheet;
Risk: High
- Its finance segment expose to liquidity risk and higher delinquency pressure in future;
- GE's AA+ credit rating give it ability to rise low cost financing, potential downgrade will hurt profitbility, future growth as well as cost of capital;
- Its energy & technology segments are sensitive to government regulation changes
Bilibala with GE
- Everyone heard the story about the great innovator - Thomas Alva Edison. He is the founder of GE;
- One of my local telephone set is manufactured by GE;
BUY, fair value $24.5
In short run, investors are worry about whether we will enter into the 2nd phrase of the financial crisis and worry about the delinquency rate on commerical loan will go up to double digit. These worry will continue give pressure to GE's stock price.
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