By Ted Mann
General Electric Co. is scheduled to report financial results
for the fourth quarter ended Dec. 31 on Friday before the market
opens. Here's what you need to know.
EARNINGS FORECAST: Earnings of 55 cents a share is the median of
estimates compiled by Thomson Reuters, up from 53 cents a share in
the same period last year.
REVENUE FORECAST: Wall Street analysts project revenue of $42.12
billion, up from $40.38 billion reported by the Fairfield,
Conn.-based conglomerate one year earlier.
WHAT TO WATCH
OIL: GE's $17 billion Oil & Gas business was to be a key
engine of growth for the company. But with the collapse of crude
oil prices, it is entering a period of retrenchment. The company
warned investors last month that revenue and profit at the unit
could fall as much as 5% as the industry contracts. J.P. Morgan has
estimated that as much as 25% of GE's industrial revenue is exposed
to oil and gas. GE officials have said aggressive cost-reductions
are coming, but be on the lookout for warnings of repricing of
backlogged orders, which would be a sign that damage from the oil
drop will be more severe than anticipated.
ALSTOM: Chief Executive Jeff Immelt says the top priority for
the company this year is the careful integration of the energy
assets it bought from France's Alstom SA. That $17 billion deal is
slated to close in mid-2015. Negotiations continue over elements of
the deal, including what Alstom executives say is about $464
million in "additional proceeds" from GE in exchange for continuing
to use the Alstom brand. GE says it is slated to get even better
synergies than anticipated from combining the two businesses, and
the integration is crucial to helping hit a key target: raising the
share of GE's earnings to 75% from industrial businesses by
2016.
THE DOLLAR: Investors will be looking for guidance on how GE
will cope with the effect of the strengthening dollar on its sales
overseas. The U.S. currency has appreciated against the euro since
GE reported guidance in December, and the euro has fallen below the
most recent assumptions for some of GE's industrial peers,
including Honeywell International Inc., Rockwell Automation Corp.
and 3M Co., according to Bernstein Research. GE has roughly 17% of
sales exposed to variations in the euro, Bernstein estimated,
though that figure could be inflated based on the inclusion of some
non-euro markets in the Middle East, the United Kingdom and
elsewhere. Still, the company has nearly half of its sales in the
U.S., and hedges for currency fluctuations.
Write to Ted Mann at ted.mann@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires