Stock of the day 16/07/2015 – General Electric Co

Since its first quarter results in April General Electric has struggled to gain much traction; can it turn things around with its Q2 2015 results on Friday?

After choppy start to the year, with an opening price of $25.45, a 2015 nadir of $23.60 in the middle of January and a $25 to $26 trading bracket across March, the biggest market mover for the company was the announcement on April 10th that the company was selling not only the majority of its financial arm GE Capital, but $26.5 billion of its real estate portfolio AND buying back $50 billion of its shares. The reason behind this move is GE’s renewed attempt to focus on its status as an industrial giant rather than a financial lender; to say investors reacted well to the news is putting it mildly, as General Electric jumped by 10.8% to $28.53, a fresh 6 year high.


(Source: IT-Finance.com 16/07/2015)

However this bump couldn’t be sustained, and despite some better-than-expected profits the company’s first quarter results were still a disappointment. Adjusted profit from continuing operations fell by 5% to $3.1 billion, whilst revenue fell to $29.4 billion from $34.18 for the same period the previous year, lower than the $34.2 billion forecast. Even excluding costs related to the sale of GE Capital this figure only rose to $33.1 billion. The oil and gas division heavily contributed to that decline, understandably given the state of the commodity sector, as it saw revenues tumble by 8%.

Most of May and June then saw General Electric struggle to escape a narrow trading band of $27 to $27.50, and by the start of July the stock had begun to slide, hitting a 3 month low of $25.89 in the process. GE has rallied slightly from this decline, and is currently trading at $26.79 (IT-Finance.com, 16/07/2015).

In terms of the company’s second quarter results, analysts are expecting a 21% drop in revenue year-on-year from $36.23 billion to $28.7 billion, whilst earnings per share are forecast at $0.31. However, beyond these headline figures investors will eagerly be waiting for any updates on GE’s continued streamlining process, including news of progress on the reduction of GE Capital. The most recent developments saw the company sell its SourceGas Holdings subsidiary for $1.8 billion to Black Hills Corp, whilst it is trying to close its $17 billion purchase of Alstom’s energy business alongside a $3.3 billion appliance sale to Electrolux, but is meeting regulatory problems on the way.

General Electric has a consensus rating of ‘hold’ with an average target price of $28.82

Thursday’s stock news:

It was set up for a big fall if it didn’t deliver, but deliver it did as Netflix surged 10% after the bell following its post-close Q2 earnings release last night. This increase followed a 7-for-1 stock split that takes the company back to the $100s, with its current price at around $108 compared to Wednesday’s $703.15 closing price. A global increase in subscribers of 3.28 million was more than impressive, especially since its 900,000 pairs of fresh eyes in the US eclipsed the 600,000 forecast; similarly, the international increase was 2.37 million compared to the expected 1.9 million. Add on a rise in revenue from $1.34 billion to $1.64 billion, and Netflix’s understandably soaring stock continues to sit atop the S&P 500 in terms of market growth in 2015.