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Here's what to watch for when GE reports Q4 2016 results Friday before the open…
GE is expected to post earnings per share (EPS) of $0.46 on revenue of $33 billion. That compares to EPS of $0.52 on revenue of $34 billion in the same quarter a year ago.
On Dec. 14, GE reaffirmed its guidance for the full year. The firm sees EPS between $1.48 and $1.52 for FY2016, with organic growth up to 2%. The consensus forecast is for $1.49.
The company also reaffirmed guidance for FY2017. GE projects EPS between $1.60 and $1.70 for the current year. That's right in-line with consensus estimates of $1.67. GE went on to say it is poised to hit $2.00 EPS in 2018 despite ongoing oil and gas headwinds. To date, analysts are forecasting EPS of $1.90 for 2018.
Earnings and guidance aside, investors will also be looking for an update on the acquisition of Baker Hughes Inc. (NYSE: BHI).
General Electric Earnings Preview: Watch for BHI Update
In late October, GE announced that it is creating a $32 billion oil business by combining its petroleum-related operations with Baker Hughes. The move is an ambitious bet on a rebound in oil prices and the overall industry.
The new company will be one of the industry's largest and most nimble players. It brings together a lucrative portfolio of capabilities spanning oil field services, equipment manufacturing, and technology.
GE will own 62.5% of the merged entity, which will be publicly traded. The deal is expected to close in the middle of 2017. First, some regulatory hurdles must be cleared. The latest talk is that GE is prepared to sell its water division to receive regulators' blessing.
The transaction is expected to add $0.04 a share to GE's earnings in 2018 and $0.08 by 2020. The company also anticipates savings of $1.6 billion by 2020, with revenue projected at $34 billion.
Oil prices have rebounded sharply since falling into the mid-$20 per barrel range in early 2016. GE is well-positioned to benefit as oil prices head higher and production ramps up.
The General Electric earnings report also takes on added importance, because the company is typically viewed as a barometer for the entire U.S. economy…
Why GE Is a Key Gauge of the U.S. Economy
General Electric has numerous multifaceted and in-demand business lines. So the company's earnings frequently follow the larger trends of the U.S. economy.
Here's a look at some recent developments at GE…
- Tuesday, GE Power announced an order from Aluminum Bahrain B.S.C. for a turnkey combined-cycle power plant. The deal includes three GE HA gas turbines, which will power the world's largest single-site smelter.
- On Jan. 11, Bird Rock Bio entered an agreement with GE Healthcare for process development, formulation, and manufacture of namacizumab (a novel therapeutic antibody to the cannabinoid 1 receptor) in preparation for phase 2 studies.
- On Jan. 4, Boeing Corp. (NYSE: BA) and GE Capital Aviation Services (GECAS) announced an order for 75 737 MAX 8 airplanes. The order was booked in December and is valued at $8.25 billion. The follow-on order increases the GECAS firm order book for the 737 MAX to 170 airplanes, the largest of any aircraft leasing company.
The current overall analyst rating on GE is "Overweight" with a median price target of $34.50.
GE has paid a quarterly dividend without interruption for over 100 years. On Dec. 9, GE hiked its quarterly dividend from $0.23 to $0.24. At a recent $31.21, GE shares boast an above-average yield of 3.08% and are up 9.56% over the last year.
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- Dividend.com: General Electric
- The Wall Street Journal: GE: Research and Ratings
- CNBC: GE-Baker Hughes: Some Call the Deal Unprecedented; Others See a Competitive Nuisance