Investing in GE

GE is just about the only stock you can buy, that emcompasses the Dow component. This company is large enough, and owns enough subsidiaries in each segment of the market, that when you buy GE, you are pretty much buying the Dow index. In times of volatility, and yet you are betting the economy to stablize and recover, GE would be a very safe bet.

After sliding back into the mid-thirties in March, shares in General Electric have gained nearly 12% this year as market participants focus on the company's strategic position in a healthy global marketplace. With three quarters under its belt now, 2007 has proven to be a strong year for General Electric.

In terms of its capital structure, the company has sold off slower growth and profit businesses, utilizing the monies to strengthen its portfolio by investing in higher growth areas including energy and infrastructure. It has also reduced its cost footprint and has returned cash to shareholders. Today, shares are trading lower after GE reported earnings of $0.50 per share, in line with expectations. The results included six cents in restructuring in continuing operations and another penny as result of the credit turmoil. Revenues grew 12.3% from the prior year period to $42.53 billion versus the consensus estimates of $42.4 billion.The ongoing bullish themes were organic revenue growth of 8% and strong order growth of 20%, which bodes well for the medium-term growth outlook and visibility.

The company's fourth quarter guidance of $0.67 to $0.69 cents per share brackets the consensus estimate of $0.68.The disappointment, which is likely weighing on the stock, is the fact that GE wasn't always able to convert growth into profitability. Within the infrastructure segment, order and topline growth remained robust, but earnings failed to keep up with the pace as margins fell 70 basis points. The reason is that equipment orders continue to outpace services which in turn dampens margins. Commercial finance was also a bit lighter than expected at $1.4 billion (up 12% vs. 15% guidance); Industrial $513 million in earnings before interest and taxes (up 6% vs. 10-15% guidance); Health Care $692 million in earnings before interest and taxes (-1% vs. flat guidance). On the upside, NBC continues to gain momentum.

The unit achieved $589 million in earning,s up 9% for the quarter as the network gains strength with its fall line up helping to boost advertising rates.

Overall, while the quarter was a bit mixed, Ithink investors should continue to focus on GE's strong long-term growth prospects, global footprint, diversified portfolio of higher-growth businesses, strong financial position, and emphasis on bolstering shareholder value.

For the full year, GE expects to reach $2.19 to $2.22 per share, excluding items. That is in line with the consensus estimate of $2.21.