NEW YORK (
shares edged lower Monday, even as at least two analysts raised price targets on the stock and two others lifted earnings estimates following the conglomerate's first-quarter report on Friday.
General Electric turned in an impressive quarter, posting earnings from continuing operations of 21 cents a share to beat Wall Street's consensus estimate by a nickel. Though its shares were initially up in the premarket action on Friday, they opened down slightly and were dragged still lower with the rest of the market following the
Securities and Exchange Commission's
announcement of civil fraud charges against
General Electric shares may also have seen some weakness Friday because of its own problems with the SEC.
reported Friday the regulator is looking into issues raised by "On the Brink," former Treasury Secretary Hank Paulson's firsthand account of the pressures he faced during the financial crisis. Paulson states in the book that GE Chairman and CEO Jeff Immelt confided that GE was having problems raised short-term debt through the commercial paper market. Such statements would have been at odds with Immelt's public statements at the time, as this
Immelt has said he does not recall discussing problems raising commercial paper on the dates that Paulson says the conversations occurred. No analysts asked about the issue during General Electric's conference call on Friday.
The weakness carried over into Monday with GE shares shaving off another 3 cents to finish the day at $18.94 per share. The shares were in negative territory all day, despite the positive reports from several analysts.
On Sunday, Goldman Sachs raised its price target a dollar to $22, as analyst Terry Darling noted credit losses were 32% lower than his estimates. Morgan Stanley also upped its price target to $22 in a report released mid-Monday, raising estimates for the first time in more than two years. Deutsche Bank and Barclays also lifted their earnings expectations in reports published on Monday.
The Goldman Sachs charges may still be the biggest factor at the moment for General Electric investors, however. Many commentators believe the charges make it more likely Congress will pass tough new financial reforms, which would hurt profits over the long term for most large financial companies, including GE Capital, which if it were a bank would be the sixth largest in the U.S. in terms of assets.
Because GE Capital has the implicit support of GE's industrial business, it has been subject to lighter regulation than large banks. Most observers have expected that to change, and GE would be subject to Federal Reserve oversight for the first time under legislative reform proposals put forward both by the House and the Senate.
Last year, some GE watchers were concerned the conglomerate might have to spin off GE Capital. Those concerns have died down in recent months, however, following assurances from GE executives they do not expect to have to take such a step. Even with the recent pullback, GE shares are up about 25% year-to-date.
Written by Dan Freed in New York