GE’s rate cut not as bad as it seems

Article Excerpt

GENERAL ELECTRIC CO. $10 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.6 billion; Market cap: $106 billion; Price-to-sales ratio: 0.6; WSSF Rating: Above Average) has lost its AAA credit rating due to concerns over the quality of assets held by GE Capital, GE’s finance division. GE Capital profits from the difference between the rate it charges borrowers and the rate it pays to its bondholders. The lower rating will force it to pay higher interest on new bonds. Still, GE expects GE Capital to be profitable in the first quarter of 2009. GE aims to shrink GE Capital’s contribution to its overal profit, to 30% from 50%. This cuts GE’s risk. As well, GE’s industrial businesses, such as locomotives and power-plant turbines, should benefit from new government spending on infrastructure. GE is a buy. buy…