Thanks Tim, GS really came out strongly supporting GE yesterday, and with some passion.
I agree with you that between lower power system sales, lower leasing levels and the complex nature of it's balance sheet are concerning many. I do not know where Martin Sankey is coming up with his robust power sales ideas.
GE is at the same price as it was in March of 1998.
KO and G are considerably under their 1998 price levels, PG is also lower than it's 1999 price peak. I remember front cover stories on these 4 stocks back in 1997 when Portfolio managers were saying that their was no price to high to pay for companies like these growing at 15-18% a year.
Always a warning signal when you hear talk like that.
John
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NEW YORK (CBS.MW) -- Highlighting General Electric's actions to address investor concerns regarding accounting quality, Martin Sankey touted the industrial giant Thursday as his best stock pick for 2002.......
.....And those earnings are yet another reason Sankey is singing GE's praises.
"(GE has) highly visible earnings growth at a time when many companies are articulating what we judge to be unrealistic 2002 earnings prospects," he said. "GE has consistently affirmed 2002 EPS expectations of $1.65 to $1.67 per share and indicated that GE could deliver 10 to 15 percent earnings per share expansion in 2003." This, he believes, would occur even if GE Power Systems' net income were to decline $500 million from 2002 levels as he expects any possible decline in Power Systems to be offset by accelerating earnings from short-cycle units Plastics, NBC and appliances as the U.S. economy rebounds and from acquisitions and services growth at Aircraft Engines.
Sankey thinks a cyclical decline at GE Power Systems starting in 2003 can be weathered without materially damaging the company's prospects as, unlike the telecom sector, GE did not finance its customers and as of December 2001 it had $8.3 billion of customer advances in hand. Furthermore, he cited the "fragile" condition of the U.S. electrical power infrastructure.
"There is little excess capacity, and power generators need modern equipment to profitably generate electricity at normal prices," he said. "There will be cancellations and stretch outs, but turbine demand is not going to zero, or even pre-1998 levels."
Among the drivers Sankey sees for 2002 are surging sales and earnings at the company's Power Systems, Medical Systems and GE Capital businesses. He also expects cost savings from digitization initiatives to lower sales general and administrative (SG&A) costs as a percentage of revenue by at least 100 basis points annually in 2002 and 2003.
Valuation has also become a big part of the equation, according to Sankey, since after underperforming the S&P 500 in 2000 and 2001, GE's P/E is now at its lowest level in five years.
"We believe the deliverables of visible 10 percent plus earnings growth, rising dividends, strengthening market shares, rising returns, and limited risk of materially underperforming investor expectations should eventually prove attractive to investors," he wrote.
In the near-term, Sankey expects release of the company's annual report, a probable investor briefing, and its first quarter earnings report to serve as catalysts for the stock. |
