Last week, General Electric (GE) gained 3.8%–and drew near-universal kudos from the analyst community–after beating earnings forecasts. Today, Citigroup joined the chorus of praise for General Electric.
Associated Press Citigroup’s Deane Dray and team explain what they liked about General Electric’s financial results:
There was much to like in Buy-rated GE's 1Q14, nicely distancing itself from the disappointments last quarter and boosting confidence in its 2014 operating framework. Among the feel-goods were a sector-best (so far) 8% organic growth, 50 bps margin expansion, and nice progress in the cost-out Simplification initiative. Looking ahead, mgmt signaled two new capital allocation catalysts: (1) more divestitures are in the works and (2) it is now pursuing acquisitions bigger than the self-imposed $1-$4 bil bolt-on range that it has been operating under for the past two years. We expect this means GE will consider $7-$9 bil deals, but we don't see this flexing up in deal-size impinging on the ongoing investor-friendly capital deployment to dividends and buybacks. We consider GE to be well-positioned as a "Control Your Own Destiny" industrial and as a mostly unloved value story. The record $245 bil backlog gives it nice earnings visibility, and the ongoing mix shift to 70/30 industrial/finance should drive multiple expansion.
General Electric’s earnings could also be a good sign for Actuant (ATU), United Technologies (UTX) and Honeywell International (HON), Dray says.
Shares of General Electric have gained 0.2% to $26.63 at 2:03 p.m., while Actuant has fallen 0.6% to $34.68, United Technologies has dipped 0.2% to $118.33 and Honeywell International is unchanged at $93.10.
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