GE margins under pressure,

On Friday we received Q4 results from GE which not only tells us a lot as investors in the stock but also tells us a lot about the economy in General. Here is their inspiring About GE explanation.


"GE (NYSE:GE) works on things that matter. The best people and the best technologies taking on the toughest challenges. Finding solutions in energy, health and home, transportation and finance. Building, powering, moving and curing the world. Not just imagining. Doing. GE works."


Ok so here are the numbers. For the quarter EPS were up 20% to 53c. This was in line with expectations. Full year operating earnings came in at $1.64. Orders were up 8% for the quarter and margins increased 100 basis points thanks to a 1.6Bn reduction in structural costs. Well done to the team for that.


Here is a summary of the industrial segment of the business.


"Industrial segment profits rose 12% to $5.5 billion. Six of seven Industrial segments had positive earnings growth. Industrial segment margins improved 100 basis points over the prior-year period. Infrastructure orders for the quarter were $30.7 billion, up 8%. GEís backlog of equipment and services at the end of the quarter was its highest ever at $244 billion, up $15 billion from the third quarter. Industrial segment revenues grew 6%, with organic growth of 5%. Growth market revenues were up 10% for the quarter, with double-digit growth in six of nine growth regions, and growth market orders were up 13%. Services revenue grew 6%, with gains in most segments."


It sounds very positive to me. The stock currently trades at $26.58 after falling back over 2% on Friday. Having earned $1.64 for the full year the stock trades on a historic valuation of 16. It trades at 14.5 times 2015 estimates however and although I wouldnít call this cheap, it is certainly not expensive. If a share is correctly priced it does not mean you should not invest. You can grow along with the companyís earning and get paid dividends at the same time. If the company starts beating expectations then the share price should rerate.


GE is one of the best and most innovative companies out there. Their corporate structure has an amazing reputation, even the highly critical Warren Buffett approves. There is also a lot of potential for an asset unlock. There are talks about a separate IPO of their Bank, GE Capital which we would be very happy to see. The dividend is growing, costs are being cut and the order book is growing. We continue to add GE as a must in any of our New York Portfolios.