Investors See Long Term Potential in GE

Anirvan Ghosh
July 18, 2014

General Electric reported second quarter results today. Profit increased 13% from a year earlier to 39 cents a share, in line with expectations.

Revenue went up 3.4 percent to $36.23 billion and missed expectations of $36.3 billion. That might be partly the reason for the stock sliding 1.24 percent to $26.28 in early trading, which wiped out pre-market gains.

GE also announced that it is planning an IPO for its credit arm Symphony Financial, for which it expects to raise $3.3 billion. Investors on StockTwits say this is the right way forward.

GE chairman Jeff Immelt has focussed on the company’s industrial businesses. As part of that GE spent $17 billion on Alstom’s energy assets. Immelt has also sought to pare the financial business, which had imperiled the company during the 2008 financial crisis. GE is seeking to raise $3.25 billion from the IPO. Investors seemed to approve.

Sentiment was 80% bullish according to Stocktwits analytics. Investors were expecting further gains in stock, more so because the market was doing well, driven by Google’s results and easing of heightened concerns from yesterday on Ukraine and the Middle East.

One of the reasons, perhaps, was that investors were not happy with results being in-line. Some of them wanted a beat, harking back to the days of Jack Welch.

The stock might still do better. Deutsche Bank said in a note that “we believe the second half of the year could be shaping up relatively more positively for GE given several prospective catalysts and GE’s share price underperformance YTD that should offer a more favorable base from which to expand.”