This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Why You Should Plug Into General Electric

NEW YORK (TheStreet) -- General Electric (GE - Get Report) has been in the headlines recently because some analysts contend the company needs a major overhaul.

Chief Executive Jeffrey Immelt, who has led GE since since 2001, may step down sooner than his expected 20-year tenure and GE's board is now considering shortening the standard term for its CEOs, according to The Wall Street Journal.

But for now, it is still Immelt's show to run. And following GE's strong first-quarter earnings report, which shows a meaningful outperformance over conglomerates such as Honeywell (HON) and Danaher (DHR), investors would be wise to plug into General Electric's new direction. The company is demonstrating that "boring" is not the enemy of profitability.

On Thursday, General Electric posted a 12% rise in overall industrial profits. The company's strength in businesses such as jet engines, gas turbines and oil industry equipment offset weakness in areas such as transportation and health care. Excluding one-time items, the company delivered operating earnings of 33 cents per share, topping average estimates of 32 cents.

Overall revenue fell 2% to $34.18 billion, slightly missing estimates of $34.36 billion. The big story, however, was the progress management is making in transitioning the business from its financial unit to establish more of a focus on GE's traditional manufacturing businesses. The latter segment, which posted 8% revenue growth, is by far GE's strongest.

In fact, the company posted 14% revenue growth in both aviation and power/water segments, its two largest industrial businesses. GE's oil and gas division posted a 27% revenue increase. As strong as these numbers appear, I don't believe management, particularly Immelt, has gotten enough credit.

Given the breadth of GE's end-markets, which it has achieved from various acquisitions, there have been complaints about GE's weak organic growth. This is the metric that measures a company's operational performance using only internal resources and excluding events like acquisitions.

For the first quarter, General Electric delivered organic growth of 8%, twice the average estimate, which was for growth of 4%. What's more, that the company posted a profit margin of 13.4%, which expanded by 50 basis points, suggesting that management's decision to focus on its industrial segments is paying off.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
GE $29.89 0.00%
AAPL $93.24 0.00%
FB $117.81 0.00%
GOOG $701.43 0.00%
TSLA $211.53 0.00%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs