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On Friday, General Electric reported an 18% rise in Q2 profits, and posted earnings of $0.34 a share. GE’s revenue fell to $35.6 billion on the sale of its majority stake in NBC Universal to Comcast, but came in better than expected.
Yet the stock has been trading. Here’s what’s worrying investors and why analysts maintain their buy rating on GE:
- UBS analysts were concerned about GE Energy in specific which is selling gas and wind turbines at lower prices while struggling with $12 billion in acquisition costs. They were also concerned about the company’s leverage and the risk to its operating income, i.e. its earnings before interest and taxes.
- UBS analysts were also concerned about General Electric Capital Services Inc’s (GECS) earnings growth.
- Citi analyst Deane Dray believes GE is an “attractive turnaround story that should be bought ahead of the strong industrial-driven earnings rebound in 2012.”
- Drey believes the company has taken major strides since the financial crisis, pointing to to the company’s loss provisions, funds earmarked for anticipated losses that become a part of its operating expense, which fell below its long-term average which. He was also impressed by the conglomerate’s aeroplane engines deals.
- Goldman Sachs analysts remain bullish on GE’s industrial portfolio, and expect its cash return to shareholders to rise. Risks to the stock however include energy equipment pricing, higher taxes, and slowdown from weak global economic growth.
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