Think Big Oil stocks like Exxon Mobil (XOM), or more generally big name stocks that tend to trade in a range for extended periods, and take longer to break out of those ranges than any one earnings report can accomplish, even if their meet, miss or beat of the bottom line gets plenty of headline attention.
When it comes to GE specifically, earnings is a battle between operating margins in the core industrial businesses, and the legacy of GE Capital.
It's been many quarters in a row now that investors have been left in limbo when it comes to the margin story for several key businesses, such as natural gas and wind turbines."We're almost at the exact same spot as we've been," said Morningstar analyst Daniel Holland. "They pitched margins as being strong this year on the back of not so robust growth. I expect to hear wind margins are getting better after bottoming out," the analyst said. The discussion of the bottoming in wind margins has lasted for more than a year, though. "Industrial margins last year were low for them," Holland said, down in all four of the core industrial businesses. Holland takes the long view. "Strong top line growth quarter over quarter and operating margin improvement are good things, but are not the things that get me most excited." Its GE's positioning in energy, health care, and aerospace, for example, and the growth expectations for these business and key geographic expansion into emerging markets, that will allow the rest of the financials to fall into line. "Over time, the trend in margins should be solid," Holland said, even if the short-term outlook remains cloudy. Jack de Gan, principal and senior advisor at investment manager Harbor Advisory, said the impact of emerging markets expansion on growth should help to counter what will be lackluster global growth for GE on slowly improving margins. In a March presentation, GE officials said they expect margins to grow by 50 basis points per year for the next three years, which would bring the recently underperforming margins to a healthy level of 16.5% to 17%. GE shares may decline if operating margins are not improved in the quarter -- as has happened in the recent past -- but a decline in GE shares from the top-end of its recent trading range wouldn't be near a panic situation, and might not even last the length of a trading session. The 52-week range for GE shares is roughly $14 to $21 and the stock is in the $19 range ahead of earnings, leaving some room for an initial knee-jerk reaction to the downside.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV