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GE Capital Returns $3 Billion to Parent (Update 2)

Transportation revenue increased 23% sequentially to $1.57 billion in the second quarter, growing 27% year-over-year. Second-quarter segment profit was $282 million, increasing from $232 million in the first quarter, and $178 million during the second quarter of 2011.

GE Capital

GE Capital's second-quarter revenue totaled $11.5 billion, increasing slightly from the previous quarter, but declining 8% year-over-year, "driven by planned shrinkage," while the finance subsidiary's second-quarter profit grew to $2.1 billion, from $1.8 billion in the first quarter, and $1.6 billion, during the second quarter of 2011.

Following the $3.0 billion payment to the parent company, GE Capital's Tier 1 common equity ratio was a strong 10.1%.

Jack De Gan, the chief investment officer of Harbor Advisory of Portsmouth, N.H., said on Wednesday that "there may be as much as six billion going upstream from GE Capital to the parent company by the end of the year, which is going to allow the company to increase the shareholder dividend and fund some buybacks," since GE "would love to get the number of shares outstanding back to where it was before the credit crisis."

GE's shares closed at $19.80 Thursday, returning 13% year-to-date, following a 1% return during 2011.

GE Chart GE data by YCharts

The shares trade for 11.5 times the consensus 2013 EPS estimate of $1.73. The consensus 2012 EPS estimate is $1.54.

Based on a 17-cent quarterly payout, the shares have a dividend yield of 3.43%.

JPMorgan Chase analyst Stephen Tusa rates General Electric "Overweight," with a $21 price target, and on Friday described GE's second quarter as a "pretty clean, straightforward operating result, with highlights being Industrial organic growth, and margins, which beat, and are now ahead of the +30-50 bps guidance, while orders held in better than we were expecting with better price, especially in the key Energy Infrastructure segment."

Tusa went on to say that "the stock has been strong, but in the context of a choppy market, we think the results validate the strength which we think is driven by GECS cash, late cycle earnings growth and relative safety, none of which changes on this result."

Interested in more on General Electric? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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