On the face of it, there is no way GE (NYSE: GE) should be at a 52-week low. The company is as solid as a rock, a "safe haven" stock. Its yield is 3.7%. But, today the stock did hit its period bottom at $32.47 down from its high of $42.15.
In 2007, GE had revenue of $172.7 billion and operating profit of $22.5.
GE’s forecast for 2008 would be the envy of most companies. It expects 10% or better EPS growth and organic revenue growth of two to three times GDP. Of course, GDP may not grow much this year.
The real problem that Wall St. has with GE is that three of its six operating segments are doing poorly. That leaves the big infrastructure and the company’s two financial operations to pull the majority of the load. If the infrastructure business hits a bad patch, it could undermine the earnings forecasts for the entire company.
Last year, the infrastructure business revenue rose 23% to $57.9 billion. Segment operating income for the unit was up 23% to $10.8 billion. That full-year operating income was more than the total of the industrial, NBC, and healthcare units combined.
It is hard to get investors excited about the three units at GE that cannot boast even modest success. Last year revenue at the healthcare unit rose just over 2% to $17 billion. Operating income fell slightly to just over $3 billion. Revenue at NBC Universal fell a 5% to $15.4 billion. Operating income was up 7% to $3.1 billion.
At GE’s industrial business revenue was flat at $17.7 billion. In Q4, a small amount of revenue was transfered from this segment to the commercial finance operation. Operating income in industrial segment rose 8% to $1.7 billion.
GE has made a great effort to convince Wall St. that its initiatives in emerging markets will drive double digit growth in regions including parts of Asia and India. Those areas are politically and economically volatile, so there are real risks in those forecasts.
The amount of patience that investors have in the industrial, healthcare,and NBC operations has almost certainly worn out. Until GE does something to improve its prospects in those businesses, the shares are not likely to recover.
Douglas A. McIntyre