Industrial conglomerate and financial services powerhouse General Electric (NYSE:GE) reported first quarter results on April 20, 2012 that consisted of many moving parts. On a reported basis, sales and profits fell, but by management's estimations of its core operations, the trends were firmly in the double digits. The key consideration for investors is what GE's growth will look like in future years, and given its size, it could prove difficult to move the needle on its top line.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

First Quarter Recap
Total reported revenues fell 8% to $35.2 billion, but increased 4% to $35 billion, when backing out the divestiture of NBC Universal in a transaction with cable giant Comcast (Nasdaq:CMCSA) (Nasdaq:CMCSK) (NYSE:CCS) that was announced at the end of 2009. Industrial sales advanced 13% to nearly $24 billion when backing out NBCU. Management detailed that organic growth was 11% and was led by strong trends in the oil and gas space, which reported 18% growth to $2.6 billion. Total energy infrastructure also reported 18% growth, while the transportation operations logged impressive 41% growth.

Reported earnings fell 4% to $3.3 billion, or 31 cents per share, but were again stronger when looking at GE's definition of operating earnings, which grew 1% to $3.6 billion. On a per-share basis, operating earnings advanced 3% to 34 cents per share, but when backing out NBCU and other one-time items, grew 17%. GE Capital, GE's financial segment, is a key contributor to profits and though net earnings were flat at $1.8 billion on a reported basis, they advanced 27% when backing out other nonrecurring items. The rest of the bottom line stemmed from the industrial businesses.

Outlook and Valuation
For the full year, analysts project very modest total revenue growth of 1.5% and total revenues of almost $150 billion. The consensus earnings estimate currently stands at $1.54 per share and would represent annual growth of more than 25%. At the current share price of $19, the forward P/E is about 10.79. This is below the market's forward earnings multiple of nearly 14, which is also roughly GE's average multiple over the past five years.

SEE: 5 Must-Have Metrics For Value Investors

The Bottom Line
GE is currently reasonably valued on an earnings basis and possesses an above-average dividend yield of 3.5%. However, it is difficult to get a gauge on what its sustainable earnings growth might look like going forward. To grow sales 10% annually, GE must add $15 billion through a combination of organic growth and acquisitions. This is equivalent to roughly half of rival Honeywell's (NYSE:HON) annual revenues. GE Capital will likely continue to improve and pay dividends to the parent company, but the continued increase in industrial activity will make double-digit revenue growth an uphill battle, given just how large GE is.

SEE: Analyzing An Acquisition Announcement

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Options & Futures

    Use Options to Hedge Against Iron Ore Downslide

    Using iron ore options is a way to take advantage of a current downslide in iron ore prices, whether for producers or traders.
  2. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  3. Markets

    Why Gluten Free Is Now Big Business

    Is it essential to preserving your health, or just another diet fad? Either way, gluten-free foods have become big business.
  4. Professionals

    Chinese Slowdown Affects Iron Ore Market

    The Chinese economy's ongoing slowdown is having a major impact on iron ore demand.
  5. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  6. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  7. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  10. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!