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Can GE Beat Q2 Earnings on Digital & Industrial Focus?
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Industrial goods manufacturer General Electric Company (GE - Free Report) is scheduled to report second-quarter 2016 results before the opening bell on Jul 22. In the last reported quarter, General Electric’s operating earnings were in sync with the Zacks Consensus Estimate. Over the trailing four quarters, General Electric delivered an average positive earnings surprise of 6.8%, successfully beating estimates on two occasions. Let’s see how things are shaping up for this announcement.
Key Factors in the Second Quarter
General Electric is actively pursuing massive restructuring initiatives to create a simpler and nimbler firm. From a classic conglomerate with diversified business interests in financial services, media, industrial and technology-based operations, the company is pruning its operating portfolio to focus on core manufacturing businesses with a digital edge.
Since Apr 2015 through the end of Jun 2016, GE Capital inked sale agreements worth approximately $180 billion in ENI, of which it has already completed deals worth $156 billion. By and large, as the business units are performing assets, they have been selling on par and often above par. Also, there is significant demand for these assets from financial firms that have very few solid buying opportunities.
The transactions are in conformity with the corporate strategy of building a manufacturing-based entity with emphasis on big-ticket items such as aviation engines, drilling machines, generators, medical equipment and scanners. With these restructuring initiatives, General Electric expects operating earnings from the industrial business to comprise over 90% of its total operating earnings by 2018, up from 58% in 2014.
During the second quarter, General Electric completed the divesture of its appliance business to Haier Group, a Chinese multinational consumer electronics manufacturing firm. The transaction unlocked incremental value by allocating more resources to high-growth core industrial businesses. Other notable divestures during the quarter include the sale of GE Capital’s restaurant franchise financing assets in the U.S. The transactions include about $1.4 billion in ENI and are likely to yield $0.2 billion of capital to General Electric.
General Electric has about 22,000 employees in the U.K. and over 100,000 employees in Europe. Despite the Brexit referendum, management reiterated that it would continue to focus on the digital transformation of the continent including the U.K. to explore growth opportunities in the region. During the to-be-reported quarter, General Electric had initiated steps to supplement its digital presence in Europe and foster growth of the industrial ecosystem for the continent’s overall development. The strategic move was largely fuelled by the market predictions that digitization of products and services is likely to yield an excess of 110 million Euros in annual revenues in Europe over the next five years. General Electric has also opened a new digital office in Paris – Digital Foundry, which is likely to be the hotbed for the industrial ecosystem. The Digital Foundry forms a global network of centers through which GE Digital intends to incubate local startups, form client collaborations to develop new applications and extend the burgeoning community of industrial developers in Europe.
The company also intends to invest $3 billion in Saudi Arabia in projects related to water, energy, aviation, digital and other non-oil industries to help the country shed its dependency on crude oil production for economic development. The company further intends to double its workforce in the country to 4,000 by 2020. The strategic move will enable General Electric to expand its presence in Saudi Arabia and augment its revenues, while playing an integral part in transforming the regional dynamics.
Our proven model conclusively shows that General Electric is likely to beat earnings this quarter as it possesses the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is perfectly the case here as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at +2.17%.
Zacks Rank: General Electric’s Zacks Rank #3 when combined with a positive ESP makes an earnings beat likely this quarter. Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
LPL Financial Holdings Inc. (LPLA - Free Report) has an Earnings ESP of +2.33% and a Zacks Rank #3.
Federated Investors, Inc. has an Earnings ESP of +2.13% and a Zacks Rank #3.
Cullen/Frost Bankers, Inc. (CFR - Free Report) has an Earnings ESP of +0.96% and a Zacks Rank #3.
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Can GE Beat Q2 Earnings on Digital & Industrial Focus?
Industrial goods manufacturer General Electric Company (GE - Free Report) is scheduled to report second-quarter 2016 results before the opening bell on Jul 22. In the last reported quarter, General Electric’s operating earnings were in sync with the Zacks Consensus Estimate. Over the trailing four quarters, General Electric delivered an average positive earnings surprise of 6.8%, successfully beating estimates on two occasions. Let’s see how things are shaping up for this announcement.
Key Factors in the Second Quarter
General Electric is actively pursuing massive restructuring initiatives to create a simpler and nimbler firm. From a classic conglomerate with diversified business interests in financial services, media, industrial and technology-based operations, the company is pruning its operating portfolio to focus on core manufacturing businesses with a digital edge.
Since Apr 2015 through the end of Jun 2016, GE Capital inked sale agreements worth approximately $180 billion in ENI, of which it has already completed deals worth $156 billion. By and large, as the business units are performing assets, they have been selling on par and often above par. Also, there is significant demand for these assets from financial firms that have very few solid buying opportunities.
The transactions are in conformity with the corporate strategy of building a manufacturing-based entity with emphasis on big-ticket items such as aviation engines, drilling machines, generators, medical equipment and scanners. With these restructuring initiatives, General Electric expects operating earnings from the industrial business to comprise over 90% of its total operating earnings by 2018, up from 58% in 2014.
During the second quarter, General Electric completed the divesture of its appliance business to Haier Group, a Chinese multinational consumer electronics manufacturing firm. The transaction unlocked incremental value by allocating more resources to high-growth core industrial businesses. Other notable divestures during the quarter include the sale of GE Capital’s restaurant franchise financing assets in the U.S. The transactions include about $1.4 billion in ENI and are likely to yield $0.2 billion of capital to General Electric.
General Electric has about 22,000 employees in the U.K. and over 100,000 employees in Europe. Despite the Brexit referendum, management reiterated that it would continue to focus on the digital transformation of the continent including the U.K. to explore growth opportunities in the region. During the to-be-reported quarter, General Electric had initiated steps to supplement its digital presence in Europe and foster growth of the industrial ecosystem for the continent’s overall development. The strategic move was largely fuelled by the market predictions that digitization of products and services is likely to yield an excess of 110 million Euros in annual revenues in Europe over the next five years. General Electric has also opened a new digital office in Paris – Digital Foundry, which is likely to be the hotbed for the industrial ecosystem. The Digital Foundry forms a global network of centers through which GE Digital intends to incubate local startups, form client collaborations to develop new applications and extend the burgeoning community of industrial developers in Europe.
The company also intends to invest $3 billion in Saudi Arabia in projects related to water, energy, aviation, digital and other non-oil industries to help the country shed its dependency on crude oil production for economic development. The company further intends to double its workforce in the country to 4,000 by 2020. The strategic move will enable General Electric to expand its presence in Saudi Arabia and augment its revenues, while playing an integral part in transforming the regional dynamics.
GENL ELECTRIC Price and EPS Surprise
GENL ELECTRIC Price and EPS Surprise | GENL ELECTRIC Quote
Earnings Whispers
Our proven model conclusively shows that General Electric is likely to beat earnings this quarter as it possesses the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is perfectly the case here as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at +2.17%.
Zacks Rank: General Electric’s Zacks Rank #3 when combined with a positive ESP makes an earnings beat likely this quarter. Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
LPL Financial Holdings Inc. (LPLA - Free Report) has an Earnings ESP of +2.33% and a Zacks Rank #3.
Federated Investors, Inc. has an Earnings ESP of +2.13% and a Zacks Rank #3.
Cullen/Frost Bankers, Inc. (CFR - Free Report) has an Earnings ESP of +0.96% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>