GE Picks Up the Pieces

For Rothbort's preview heading into the General Electric conference call, please click here.

If today was not such a miserable day for the markets, General Electric (GE - commentary - Cramer's Take) would have led us to higher ground. The company met its lowered guidance issued last quarter and did not issue any negative surprises looking forward to the third quarter. Selling off the Japanese finance unit is a major step forward to cleaning up its financial services division. Energy and aviation remain strong, and I was pleasantly surprised by the turnaround in health care.

General Electric reported EPS of 24 cents on revenue of $46.9 billion. EPS was in line with the lowered guidance and consensus estimates, while revenue was surprisingly better than expectations by 3.5%. Revenue grew 11% year over year, spurred by a 15% increase in industrial sales.

Included in the quarter was $300 million of gains on dispositions (3 cents per share) and $400 million (4 cents peer share) from restructuring.

The company also announced that it will sell its Japanese consumer financial services unit, including the Lake business, to Shinsei Bank for approximately $5.4 billion.

Major equipment orders were $13.7 billion, up 4% year over year. By product, aviation was up 11%, health care was up 8%, and energy was up 47%. Oil and gas was down 8%, and transportation was down 78% as a $1.5 billion order in the year-ago quarter did not repeat. Services orders of $9.5 billion were up 19% year over year. By product, aviation was up 14%, energy was up 19%, oil and gas was up 36%, transportation was up 41%, and health care was up 13%. Flow orders were $4.1 billion, down 3% year over year on an organic basis.

Infrastructure had revenue of $17.6 billion, up 26% year over year. Segment profits rose 24% year over year, to $3.2 billion. Aviation and energy remain quite strong, and the book-to-bill is growing.

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At the time of publication, Rothbort had no positions in the stocks mentioned, although positions can change at any time.

Scott Rothbort has over 20 years of experience in the financial services industry. In 2002, Rothbort founded LakeView Asset Management, LLC, a registered investment advisor based in Millburn, N.J., which offers customized individually managed separate accounts, including proprietary long/short strategies to its high net worth clientele. He also is the founder and manager of the social networking educational Web site TheFinanceProfessor.com.

Immediately prior to that, Rothbort worked at Merrill Lynch for 10 years, where he was instrumental in building the global equity derivative business and managed the global equity swap business from its inception. Rothbort previously held international assignments in Tokyo, Hong Kong and London while working for Morgan Stanley and County NatWest Securities.

Rothbort holds an MBA in finance and international business from the Stern School of Business of New York University and a BS in economics and accounting from the Wharton School of Business of the University of Pennsylvania. He is a Term Professor of Finance and the Chief Market Strategist for the Stillman School of Business of Seton Hall University.

For more information about Scott Rothbort and LakeView Asset Management, LLC, visit the company's Web site at www.lakeviewasset.com. Scott appreciates your feedback; click here to send him an email.