How Will General Electric (GE) Stock React To France's Approval Of Alstom Bid?

NEW YORK (TheStreet) -- Shares of General Electric Co.  (GE) are currently flat on heavy trading volume as France's government has backed a bid by GE for the country's struggling Alstom engineering group.

But the government seeks to maintain control over the firm by taking a 20% stake, according to Deutsche Welle.

An announcement was made by the French Economics Minister Arnaud Montebourg today.

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Paris would buy the stake from French building company Bouygues, which owns 29% of Alstom, Montebourg added.

The move will make the French state the biggest shareholder in Alstom and will deal a setback to GE and a joint effort by Germany's Siemens (SIEGY) and Japan's Mitsubishi Heavy Industries  (MHVYF), which have made offers to take over Alstom's power business, Deutsche Welle said.

Montebourg also said that the government was nevertheless in favor of the bid made by GE, adding that GE still needed to improve its offer.

TheStreet Ratings team rates GENERAL ELECTRIC CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate GENERAL ELECTRIC CO (GE) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • GE's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 2.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has slightly increased to $4,961.00 million or 7.61% when compared to the same quarter last year. In addition, GENERAL ELECTRIC CO has also modestly surpassed the industry average cash flow growth rate of 3.57%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • GENERAL ELECTRIC CO's earnings per share declined by 17.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GENERAL ELECTRIC CO increased its bottom line by earning $1.47 versus $1.38 in the prior year. This year, the market expects an improvement in earnings ($1.70 versus $1.47).
  • The gross profit margin for GENERAL ELECTRIC CO is rather high; currently it is at 51.60%. Regardless of GE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 8.82% trails the industry average.
  • You can view the full analysis from the report here: GE Ratings Report

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