GM Kills $10 Million Facebook Ad Campaign Because It Didn't Work
JCPenney's Ron Johnson: 'Customers Don't Get Our Pricing Strategy'General Electric Co. (NYSE:GE) got more than a lot of Wall Street observers expected for its plastics unit. Saudi Basic Industries Corp ponied up $11.6 billion in a cash-and-debt deal. GE will use the money to buy back more of its shares, a nifty way to raise EPS when earnings themselves are not growing as fast as investors would like.
Even though the deal has been expected for several days, and GE announced its plan to sell the unit several months ago, no one seems to care, at least not based on the conglomerate's stock price. The share price did get a bump up in late April when talk about breaking the company into pieces resurfaced in the markets. The stock has traded sideways since then, and is still flat over the last two years compared to an increase of well over 20% in the S&P.
Based on GE's public filings, the plastics operation contributed less than 4% to revenue. The transaction should have almost no effect on net income.
Of course, what investors want from GE is what it is not giving them: a major restructuring. GE's board wants the company to remain a conglomerate. There is no other conclusion to draw from the company's actions.The stock buy-back is cold comfort when the stock won't go up.
Douglas A. McIntyre is a partner at 24/7 Wall St.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
Reader Comments (Page 1 of 1)
5-21-2007 @ 3:07PM
A. Kosmetatos said...
Douglas
Thanks for a great article on GE I also am skeptical of the sale as the devil is in the details and am getting very impatient with the smoke and mirrors from Imelt and company on why shareholder should be patient. Keep the heat on this should be on all the financial news organizations!!
5-21-2007 @ 3:10PM
j.c. said...
mr. mc intyre..i am sorry but i just can't let you get away with the sophist thinking you expressed for fear that you may influence some weak-minded individuals. ge can't produce earnings?? how about an increase of 8.3% in efo vs. 2005 and 21.2% vs. 2004.....its even better on net income; 24.5% vs. 2005. and what about their dividend and the history of dividend increases? i cringe when i see such sloppy thinking. you're probably of the school that believes nbc is holding ge back....well check the numbers mr mc intyre...nbc is only about 9% of the company's revenue. it isn't critical mass!! you obviously know nothing about alternative critical paths because if you did you would understand that the predictability of performance and dividend and the reduced risk make ge a great play...but you and other non-analytical types (which seem to proliferate on wall st.) keep the stock down because your opinions sway the weak-minded money managers and individual stock investors.