GE quarterly results sparkle, confirming ongoing recovery

Byron's beats has another look at a recommended stock of ours that reported. General Electric. The company was founded in 1892 and was one of the original Dow components and the only one left in the current form out of those 12. Some do not exist anymore, like the U.S. Leather Company which I can imagine was useful when everyone wanted leather boots and saddles. Strangely some of the other original entrants were broken up, because they were too big or too powerful. But, GE has kept up and changed and morphed with the times. Strangely all the share splits along the way are worth noting. One GE share in 1929 is 1152 shares today. Amazing, is it not?

More quarterly results coming at us from New York. This time we had the big conglomerate General Electric coming out with some impressive numbers. This company is involved in basically everything. Here is a brief description of the sectors they are involved in from their website. ''GE is an advanced technology, services and finance company taking on the world's toughest challenges. Dedicated to innovation in energy, health, transportation and infrastructure. GE operates in more than 100 countries and employs about 300 000 people worldwide.''

Let's take a look at the numbers and then delve into the company and what the sectors are doing. Profits rose by 21% compared to this time last year. This came in at $3.76bn or 35 cents per share. This comfortably beat expectations of 32c. Goldman Sachs expects the company to make $1.39 for the year 2011. We've had two quarters of earnings so far and we look well on track for that number to be pretty accurate. That puts them on a forward PE of 13.7. Sounds cheap to me. But then again, legendary investor Bill Miller says that he has never seen equities look so cheap. Market sentiment is pushing share prices down while the earnings are growing. The saying that it takes years to build trust and one moment to break it comes to mind. That moment was the financial crisis of 08-09 and I guess it's still going to take a while to heal those wounds.

Back to GE. Revenues came in at $35.63bn. Profit margins of more than 10% is very healthy for a company that delves into so many sectors. To put things into perspective Bidvest have profit margins of 3.2%. The industrial sector experienced organic growth of only 3%. This was expected however and the sector is gathering momentum with industrial orders up 24%. GE capital saw profits double even though revenue was down slightly. This is due to a restructure in the division following a very tough period where impairments took place. In the energy infrastructure division we saw revenues up 9% but profits down 19%. This has been an ongoing trend in the renewable energy sector for a while now and the general consensus is that it is bottoming out.

In the commentary they confirmed what we already knew. This is no longer a bellwether for the US economy but one for the entire globe. Most of this growth came from key developing markets including China and India. The world is and will be for a long time coming, hungry for more and more energy. Some may say GE is too diversified and too difficult to understand. We disagree. They have strategically positioned themselves in sectors that look to benefit from this developing market revolution. We are very happy to add at these levels.