GE Amends Synchrony Filing After Earnings Report

Paul Ausick
July 18, 2014

In a filing with the U.S. Securities and Exchange Commission (SEC) Friday morning, General Electric said it plans to sell 125 million shares of its Synchrony Financial spin-off in a price range of $23 to $26 a share. The initial public offering is expected by the end of this month.

In its second-quarter earnings release this morning, General Electric Co. (GE) reported adjusted diluted quarterly earnings per share (EPS) of $0.39 on revenues of $36.23 billion. In the same period a year ago, GE reported EPS of $0.36 on revenues of $35.06 billion. The results also compare to the consensus estimates for EPS of $0.39 on revenues of $36.3 billion.

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Today’s big announcement is that the initial public offering (IPO) of GE's North American retail finance business is now scheduled for the end of July. Synchrony Financial, as the new company will be called, is the first step in GE's exit from the finance business.

The other big news for GE during the quarter was its $17 billion deal to gain control of Alstom's power and grid business. The transaction is expected to close next year, and GE expects to add $0.06 to $0.09 to EPS as a result.

GE noted that its backlog during the quarter rose more than 9% year-over-year to $246 billion on a rise of $23 billion in new orders for services and equipment. The company also won more than $36 billion in new business this past week at the Farnborough Airshow, where CFM International, its 50/50 joint venture with French firm Snecma, took orders for new jet engines for Boeing Co.’s (BA) 777-9X and other engines for other planes.

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The company did not provide guidance in its press release, but the consensus estimate for the third quarter calls for EPS of $0.42 on revenues of $36.79 billion. For the full year, EPS is pegged at $1.70 on revenues of $148.59 billion.

The company's CEO said:

GE had a good performance in the quarter and in the first half of 2014, with double-digit industrial segment profit growth, 30 basis points of margin expansion, and nearly $6 billion returned to shareholders. The environment continues to be generally positive. … Our balanced approach to capital allocation is delivering cash to shareowners. With the Retail Finance split-off and Alstom acquisition, we are boldly repositioning the Company for the future.

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Immelt did not mention the possible divestiture of the company's century-old appliance business, yet another non-financial-report issue that has to be included with the Alstom acquisition and the spin-off of Synchrony as big factors in GE's results.

Shares were down about 1% in mid-morning trading, at $26.33 in a 52-week range of $22.92 to $28.09. Thomson Reuters had a consensus analyst price target of around $29.10 before the results were announced.

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