Shares of General Electric (NYSE: GE) are showing some signs of recovering, ahead of the earnings report scheduled for this Friday, July 21. Markets expect GE to earn $1.08 a share for the full year and $1.83 next year. This implies a P/E and forward P/E of around 25x and 15x.
GE’s last quarter benefited from the strongest oil and gas order rate in 10 quarters. This time around, GE may not get that benefit as the sector showed significant weakness. Still, profits, organic revenue, and growth in verticals by 20% give investors hope. But the long slide in share price will end only when the new CEO proves the customer orders will sustain growth in the double digits.
Profit margin strength was due to better efficiency, especially helped by equipment and services costs falling. Expect the company continuing to find ways to cut costs to improve profitability. Looking ahead, GE will spend $0.25 a share on restructuring activities.
Revenue of $6.1 billion in equipment and services grew 17%, helped by the shipment of 20 gas turbines. But the service segment could have done better. Revenue from service was flat Y/Y.
Takeaway
GE looks good on paper, especially with the balance sheet. GE ended the first quarter with cash of $7.9 billion. It paid $2.1 billion worth of dividends and bought back $2.3 billion worth of stock. It had $158 billion in backlogs, up 3% from last year. GE’s business is steady, ahead of the earnings report.
