Every Thursday we bring you one of our best U.S. stock picks. You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You will read about stocks making moves you should know about, most often from coverage in our newsletter on U.S. investing, Wall Street Stock Forecaster.
GENERAL ELECTRIC CO. (New York symbol GE; www.ge.com) recently agreed to form a major new alliance with France’s Alstom SA, a leading maker of electrical-transmission equipment and parts for power plants.
Under the deal, GE will form three 50/50 joint ventures with Alstom. One will combine the companies’ electrical grid operations, while a second will focus on products for renewable energy projects, like offshore wind farms. The third will hold Alstom’s nuclear-equipment division.
In all, GE will pay $10 billion when the Alstom deal closes in 2015. The new operations it brings should add about $0.07 a share to GE’s annual earnings, starting in 2016.
By 2016, GE aims to get 75% of its earnings from its industrial businesses. The remainder will come from its finance division.
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Blue chip stocks: GE to pocket $3.3 billion from sale of appliances division
As part of its strategy of focusing on its industrial operations, the company is selling some non-industrial businesses. A recent example is its appliance division, which makes refrigerators, ovens, dishwashers and air conditioners and supplies 6% of GE’s revenue. The buyer, Sweden’s Electrolux, will pay $3.3 billion when the deal closes in 2015.
Meanwhile, GE’s earnings rose 3.3% in the three months ended September 30, 2014, to $3.8 billion from $3.7 billion a year earlier. Per-share earnings rose 5.6%, to $0.38 from $0.36, on fewer shares outstanding. Revenue gained 1.4%, to $36.2 billion from $35.7 billion.
The recent drop in oil prices could hurt sales of drilling gear and related equipment, which accounts for 13% of GE’s revenue. Even so, the company’s earnings will probably rise 7.8%, from the $1.67 a share it will probably earn in 2014 to a projected $1.80 in 2015. The stock trades at a moderate 13.3 times the 2015 figure.
The company recently increased its dividend by 4.5%. The new annual rate of $0.92 a share yields 3.8%.
GE is a buy recommendation of our advisory on U.S. investing, Wall Street Stock Forecaster.
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