During the third quarter, GE Capital paid the parent company $2.4 billion in dividends, after paying $3.0 billion to the parent during the second quarter. Morgan Stanley analyst Nigel Coe on Sunday estimated that the financial unit would pay GE $1.203 billion in dividends for the fourth quarter. The analyst continues to expect GE Capital to become a "cash machine," saying that the unit's "Basel I Tier-1 Common Equity ratio compares favorably to US Bank peers and assuming maintenance of a 10% CT1 ratio, we see potential for $30bn cash distribution
The consensus fourth-quarter revenue estimate for General Electric is $38.715 billion, increasing from $36.349 billion in the third quarter, and $37.973 billion, a year earlier. Coe trails the consensus, estimating third-quarter revenue of $37.948 million, with year-over-year declines in the Power & Water, Transportation and the GE Capital segments (driven by "asset attrition"), partially offset by revenue increases in the Oil & Gas, Energy Management, Aviation, Healthcare and Home & Business Solutions segments. Barclays analyst Scott Davis on Jan. 10 estimated that GE's fourth-quarter revenue will total $39.026 billion, with revenue growth across all segments, except for GE Capital, for which he expects a 3% decline.
Power & Water
Coe estimates that segment fourth-quarter revenue will decline by 5% year-over-year, to $7.134 billion, with a decline in gas turbine shipments to 31 from 33, a decline of more than 20% in "in Aeroderivative shipments (38) and lower balance of plant revenues. Coe also said that "in Wind, we expect 750 turbine shipments vs. 1,014 in 3Q12 and 688 in 4Q11, driving 10% Y/Y Wind revenue growth."
For the Aviation segment, Coe estimates that fourth-quarter revenue will come in at $5.047 billion, increasing 2.5% from a year earlier, "driven by easier commercial spares comps." Davis estimates the unit's fourth-quarter revenue will total $5.170 billion, as "GEnx engine shipments ramp up and spares lap easier comps. We are expecting commercial spares daily order rates to be ~flat y/y and sequentially, vs down 18% in 3Q." Davis also expects "margins to be a strong 19.6% and to continue to inflect from here as Aviation begins to see positive leverage on R&D spend and company moves up the learning curve on GEnx shipments." Looking ahead, Davis expects the Aviation segment to "show solid revenue growth over the next couple of years and ~50 bps/year of operating margin expansion driven by double digit services/analytics growth, execution on new engine launches, strategic divestitures, increased value gap, and supply chain productivity improvements."
HealthcareCoe estimates that GE's Healthcare segment will deliver fourth-quarter revenue totaling $5.212 billion, growing 1% from a year earlier, saying "we model 3% organic growth - consistent with last quarter's result, driven by Life Sciences and
Oil & Gas
Coe expects the Oil & Gas segment to see a 7% year-over-year increase in fourth-quarter revenue to $4.369 billion, with growth accelerating from a 4% rate in the third quarter, "as we expect some project deferrals to shift into 4Q sales. This is also consistent with our recent Distributor survey, which showed sequential acceleration in US O&G sales volumes."
GE's Stock: Growth and Income
General Electric's shares closed at $21.12 Wednesday, up slightly year-to-date. The shares returned 21% during 2012, following a 1% return during 2011.
General Electric on Dec. 14 raised its quarterly dividend by two cents to 19 cents, for an attractive yield of 3.60%. The company also increased its share repurchase authorization by $10 billion and extended its buyback plan through 2013. Under the company's previous buyback plan, the company was authorized to repurchase up to $4.9 billion worth of shares as of Sept. 30. The shares trade for 12.7 times the consensus 2013 EPS estimate of $1.67. The consensus 2014 EPS estimate is $1.84. Coe rates GE "Equal Weight," with a $23 price target, estimating the company will post fourth-quarter earnings of 43 cents a share, with a 2013 EPS estimate of $1.65, increasing to $1.72 in 2014. Davis rates GE "Overweight," with a $25 price target, saying that a "sector-high dividend yield and a bullish view on US gas powergen keeps us in favor of an Overweight rating on the stock," adding that "potential catalysts include powergen orders picking up, further share repos, corporate dividend announcements, and potential portfolio actions."