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General Electric stock buyback dominates Q1

Having sold off most of its real estate assets, GE has a substantial cash balance. 

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On Friday 17 April, General Electric will announce its first-quarter figures. The markets are expecting the adjusted earnings per share to fall to $0.262, down from $0.33 in Q1 2014. The year-on-year sales figures are also projected to drop down from $34.178 billion to $32.906 billion. The company’s pre-tax profits are also due to fall from $3.456 billion to $3.065 billion.

Recent company announcements have arguably rendered the institutional calls mute, but 12 had a buy rating, ten a hold, and one a sell. The average price target for the next 12 months for the company is $30.71 which is still almost 11% above the current market price.

The company is in the process of selling off much of its real estate assets. This is expected to raise $26.5 billion, and reduce the size of GE Capital – its finance unit. The company has also announced that it will buy back up to $50 billion of its own shares. This is a consequence of the company selling out of GE Capital and focusing on an industrial company rather than a financial one.

This, rather than any new developments or projects, looks set to be the driving force for the shares in the coming week. The aim is that by 2018, 90% of GE profits will come from its core industrial business.

Since May 2009 the company’s shares have been on an upward trajectory but still sit well below levels from over a decade ago. The reorganisation in the company’s model should ultimately see the share look to target the 2007 highs of over $40, but not before further asset stripping and reorganisation have been completed.

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