Energy, Health Care Could Spark GE

Look for strength from these segments in Friday morning's earnings report.
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General Electric

(GE) - Get Report

is scheduled to report fourth-quarter results before the market opens Friday. Wall Street is expecting GE to earn 55 cents on total revenue of $42.06 billion. In the year-ago quarter, GE earned 51 cents. Let's explore some of the GE business segments as we preview the quarter's results.

Energy

: If anything, this past quarter was the sweet spot for the power industry. The ever-increasing need to generate energy on a more cost-efficient basis by the power industry likely will have driven up demand for GE products. I expect strong growth and pipeline for this segment.

Insurance

: This will likely be a battleground for the company. In a recent

Barron's

article, the company was accused of understating reinsurance reserves under former Chief Executive Jack Welch. There is no doubt that over the course of the past month, Welch's replacement, Jeffrey Immelt was under the microscope over this issue and has placed tremendous internal scrutiny on the accounting for the Insurance unit. I would expect a conservative report with little upside surprise from the Insurance group.

Health Care

: This is a key segment for GE as is shown by the company's continued appetite for acquisitions in this growing field. I expect significant year-over-year growth in health care, which could be GE's shining star for the quarter.

Transportation

: Read this as aviation. If there is any doubt that this segment is not going to have a stellar quarter, then all that you have to do is read about the huge demand that

Boeing

(BA) - Get Report

and

Airbus

are enjoying.

NBC Universal

: Expect disappointment as the movie business stunk in 2005 and

NBC

continues to lose ratings to

CBS

(CBS) - Get Report

. This is nothing more than a loss leader for GE.

Financial Services

: The bread and butter of GE's business with the greatest share of total company revenues. This is essentially a bank. Just as with the commercial banks, expect some near-term weakness in the fourth quarter due to the rush to bankruptcy court and the contracting yield curve.

Material and Equipment Services

: While I like this group in the longer term, (especially when we begin to rebuild from last year's hurricanes), I expect some near-term pressure due to higher materials costs. This is not going to be an

Alcoa

(AA) - Get Report

disaster, but it will not be a standout for GE.

Let's also remember that management has tried to temper the Street's expectations for near-term growth at GE, so we need to factor that in -- for what it's worth.

At the time of publication, Rothbort was long Boeing and CBS, although positions can change at any time. Scott Rothbort has 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 both individually managed accounts and a hedge fund to its clientele. Prior to that, Rothbort worked at Merrill Lynch for 10 years. 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 an adjunct professor for the Stillman School of Business at Seton Hall University. He appreciates your feedback; click here to send him an email.