Diversified conglomerate General Electric Company (GE) recently presented its first specific earnings guidance in five years when it offered its outlook for 2015 at an investor presentation. At the same time, the company reiterated its commitment to focus more on its industrial business to reduce operating risks associated with the volatility in the financial services business.
In 2015, General Electric expects earnings from its industrial operations to be $1.10 to $1.20 a share, while the finance unit is expected to yield about 60 cents, bringing the overall tally to $1.70 to $1.80 per share. The current Zacks Consensus Estimate for 2015 is pegged at the higher end of the guidance at $1.78.
The year 2015 is termed as a pivotal year for General Electric as it renews its strategic aim to focus on core industrial businesses. Two important milestones are slated to be achieved next year. These include the acquisition of French conglomerate Alstom’s energy assets and the pending complete spin-off of the consumer-lending arm Synchrony Financial (SYF).
Earlier, General Electric spun off Synchrony Financial in an initial public offering (IPO) in July as the first concrete step towards shrinking its finance business. The strategic move is arguably the biggest step in restructuring GE Capital’s portfolio to shield the parent company from intense market volatilities that plagued the market during the 2008-09 financial crisis. The spin-off realigned the corporate strategy of General Electric to a manufacturing-based entity with emphasis on big-ticket items such as medical equipment and scanners.
General Electric is also actively pursuing the sale of its GE Money Bank AB (Nordics) consumer finance business to Spain’s Banco Santander, S.A. (SAN). The biggest bank of Spain agreed to acquire GE Capital's consumer finance business in Sweden, Norway and Denmark, for about $953 million. The transaction, announced in late June, is making good headway in terms of regulatory approvals. In addition, General Electric is further planning to divest its ownership stake in Polish Bank BPH SA. The diversified conglomerate has about 89% stake in Bank BPH.
In order to reward its shareholders, General Electric expects to return $10 billion to $30 billion to investors in 2015. The company expects non-core asset sale of $2 billion to $4 billion in 2015. With such strategic moves, General Electric expects operating earnings from its industrial business to aggregate 75% of the corporate operating earnings. We remain impressed with the focused attempts of the company to restructure its portfolio.
General Electric is one of the largest and most diversified technology and financial services corporations in the world. With products and services ranging from aircraft engines, power generation, water processing, and security technology to medical imaging, business and consumer financing, media content, and industrial products, the company serves over 100 million customers worldwide. Its segments include Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Home & Business Solutions, and GE Capital.
General Electric currently has a Zacks Rank #3 (Hold). Another company in the industry that is worth mentioning includes Carlisle Companies Inc. (CSL), which currently has a Zacks Rank #2 (Buy).
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