This article was originally published by GuruFocus
By Sarfaraz A. Khan, Research Assistant Gohar Yousuf
March 4, 2014
Last month, General Electric (GE) reported results for the final quarter of 2013, which disappointed investors as the company’s margins were below expectations. The company’s shares have fallen by 7% since the earnings release and look attractive for long term investors. The company is eying improvements in sales and profitability in the near future. At these price levels, the company offers attractive yield of 3.48%, which is considerably above the industry’s average of just 1.65%.
Earnings and Revenue Growth
In its previous quarterly results General Electric witnessed a 4.8% year-over-year growth in earnings to $4.20 billion. The company’s adjusted earnings came in line with consensus estimate of $0.53 per share. The earnings growth was driven by strong performance in oil and gas, aviation and financing (GE Capital) businesses. This is shown in the picture below.
With the exception of energy management, General Electric has managed to grow its income in all of its operating areas. Energy management’s decline had a small impact on General Electric’s bottom line as it is one of the smallest segments of the company. The underperformance of this segment, however, was one of the main reasons why the company missed its profitability target (discussed later in the article).
General Electric gets 31% of its total segment profits from GE Capital, 24% from the power & water segment and 16% from the aviation segment.
Overall, this was not a poor performance.