General Electric Slips to Sell - Analyst Blog
February 28 2014 - 5:00PM
Zacks
On Feb 27, Zacks Investment
Research downgraded General Electric Company (GE)
to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold), primarily
due to tepid fourth-quarter 2013 earnings.
Why the Downgrade?
Over the past week, General Electric has witnessed downward
earnings estimate revisions for 2014. This negative revision seems
to have resulted from the fact that General Electric failed to
comprehensively beat analysts’ expectations and posted in-line
earnings. The diversified conglomerate had posted a 2.86% beat in
the preceding quarter, and investors probably had expected it to
post a healthy beat this quarter as well.
In addition, the Zacks Consensus Estimate for the first quarter of
2014 is currently pegged at 32 cents, reflecting a year-over-year
contraction in growth of nearly 18.0%. For the current year, the
Zacks Consensus Estimate has also moved down by a penny to $1.69,
reflecting a 5.9% decline over the past week.
General Electric is also expected to underperform its peers in the
medium term as its growth estimate for the next 5 years is pegged
at 8.1%, compared with the 11.3% for the overall industry.
Furthermore, General Electric’s current PEG ratio is at 1.85
compared with the industry PEG ratio of 1.51. Conventionally, a PEG
ratio of 1 or less is considered to be healthy or undervalued
stock.
General Electric is in the process of downsizing its financial
services business, GE Capital, which generates roughly 45% of its
operating earnings. General Electric aims to reduce revenue
contribution from GE Capital to about 1/3 of total earnings in the
future. Its Industrial segment is also struggling to achieve the
margin expansions and consistent earnings growth delivered by its
peers. The company’s significant international presence further
exposes it to currency fluctuations, political and economic
disruptions — all of which can directly impact its profits.
Other Stocks to Consider
Other stocks in the industry with favorable Zacks Ranks that are
worth considering include Noble Group Limited
(NOBGY), 3M Company (MMM) and Hutchison
Whampoa Limited (HUWHY). While Noble Group carries a Zacks
Rank #1 (Strong Buy), 3M and Hutchison Whampoa hold a Zacks Rank #2
(Buy) each.
GENL ELECTRIC (GE): Free Stock Analysis Report
HUTCHINSON WHAM (HUWHY): Get Free Report
3M CO (MMM): Free Stock Analysis Report
NOBLE GROUP LTD (NOBGY): Get Free Report
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