Credit Suisse cut its earnings and price target on General Electric (GE) following the conglomerate’s “mixed” Q2 results. CS saw the quarter as “in-line” and was encouraged by the strength of GE’s conference call, but remained cautious:
we view an in-line quarter as the first step toward restoring confidence in the outlook and appreciated the length and candor of the conference call. Strength at Infrastructure and better than expected performance at GECS drove results, but earnings composition was largely a mixed bag.
Q2 is typically a q where GECS contributes less than 50% of net income; this q it contributed 51%. Comm’l Finance profit grew 7% with GE Money posting a 9% profit decline – decent results for this environment. Revenue growth at Infrastructure was impressive (+25%) but conversion wasn’t stellar, particularly in light of service revs (+21%) finally coming through. Healthcare revs grew a solid 11% reflecting 700+ OEC unit shipments in the q, but profitability suffered from execution issues and concessions to customers affected by shipment delays.
CS also doesn’t see a spinoff of GE’s Consumer and Industrial division until 2009. 2009 EPS drops from $2.45 to $2.30 and price target drops from $34 to $30.
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