General Electric GE

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General Electric(GE)

• John Myers
• Rob Park
• Matt Richter
• Tuesday, November 22, 2005

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Company Overview

• General Electric (GE) Company was founded as a
  creation of a merger between Edison General
  Electric Company and Thomson-Houston Electric
  Company in 1892.
• GE Company is a diversified industrial
  corporation engaged in the development,
  manufacturing, and marketing of various products
  for the generation, transmission, distribution,
  control, and utilization of electricity
• Operations are held in approximately 100
  countries worldwide.
  
• Headquarters based in Fairfield, Connecticut.

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GEs Business Segments (past)

• Prior July 5th, 2005, GEs businesses operated
  within 11 different segments
  
• Advanced Materials, Commercial Finance, Consumer
  Finance, Consumer and Industrial, Energy,
  Equipment and Other Services, Healthcare,
  Infrastructure, Insurance, NBC Universal, and
  Transportation

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GE Market-Focused Businesses

• As of July 5, 2005, GE reorganized its 11
  business segments into 6 market-focused core
  businesses
  
• GE Industrial provides a broad range of products
  and services throughout the world, including
  appliances and lighting, plastics and silicones
  products, and equipment services
• GE Infrastructure one of the worlds leading
  providers of fundamental technologies to
  developing countries, including energy, oil and
  gas, and water process technologies
• GE Commercial Finance provides loans, operating
  leases, financing programs, commercial insurance,
  and an array of other products and services aimed
  at enabling businesses worldwide to grow

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GE Market-Focused Businesses

• GE Consumer Finance a leading provider, under
  the GE Money brand, of credit services to
  consumers, retailers and automotive dealers
  around the world
• GE Healthcare is a leader in the development of
  a new paradigm of patient care dedicated to
  detecting disease earlier and helping physicians
  tailor treatment for individual patients.
• NBC Universal is one of the worlds leading
  media and entertainment companies in the
  development, production and marketing of
  entertainment, news and information to a global
  audience

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Segments
Advanced Materials, Consumer Industrial
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Segments

• Three segments whose operations have a
  significant effect on consolidated results and
  reflect their changing economic environments are
  Energy, Insurance and Transportation
• Energy segment is well positioned for its markets
  in 2005 and beyond
  
• Overall, Transportation reported segment profit
  that grew 0.6 billion in 2004
  
• Results at two major segments, Healthcare and NBC
  Universal, reflected continued investment and
  growth over the last three years
  
• Healthcare showed strong growth as 2004 revenues
  and segment profit both rose about 50 since 2002
  
  
• The combination of NBC and VUE in 2004, and
  successful acquisitions of Telemundo and Bravo in
  2002, has created a diversified world-class media
  company
• Most other operations achieved operating results
  in line with expectations in the 2002 to 2004
  economic environment
  
• Solid core growth, disciplined risk management
  and successful acquisitions have delivered strong
  results in commercial and consumer finance
  
• Infrastructure, with growth platforms such as
  security and water treatment, continued to grow
  significantly through acquisitions
  

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Market Outlook

• Market is increasing through Global growth

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Global Growth

• Global revenues rose 18 to 71.8 billion in 2004
  
  
• GE revenues in Europe rose 40 led by Healthcare
  and NBC Universal reflecting the Amersham
  acquisition and the combination of NBC and VUE
  
• GE revenues in the Pacific Basin increased 13
  led by Advanced Materials, Infrastructure and
  Energy.
  
• U.S. exports rose 35 on strong growth at Energy
  and Transportation
  

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Ratios Comparison
It is important to note that negative free
cash flow is not bad in itself. If free cash flow
is negative, it could be a sign that a company is
making large investments. If these investments
earn a high return, the strategy has the
potential to pay off in the long run.
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Recent Headlines in 2005

• 6/27 - GE reorganizes business units
• 11 units down to 6
• 7/8 - Growth and emerging markets conference
• Intl Operations generate half of GE revenue and
  should grow 15 in 2005 and grow for 5 years
  
• 10/14 - Reports 9 overall revenue growth
• Consumer and Commercial Finance doing well
• 11/18 - Sells insurance business to Swiss Re,
  further divesting its insurance business

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Charting the Headlines
6/27
11/18
10/14
7/8
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What Bears Might Say

• Accounting is not always conservative
• GEs large size makes it difficult to increase
  revenue
  
• Exposed to risk across many industries
• Goodwill too large of a percentage of assets due
  to many acquisitions

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Bulls Point of View

• Best growth numbers in years this 1st Quarter
• Revenue 19 and Earnings 25
• GE invest heavily in RD Comp. Adv
• 12.5 Billion over last 5 years
• Uses technologies across different units
• Selling off insurance business
• Lost 700 Million over last 5 years
• GE does not over-invest
• Dividend payout ratio 50 over past 4 years
• Strong Management
• Jeff Immelts Pay

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Recommendation

• BUY
• Currently 36.20
• AAA Credit Rating
• Making a run
• SP 500 Up
• Morningstar
• 38.00 Fair Value
• DCF 37.68

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Questions????