GE Capital: More focused, secure; positioned for future

December 2, 2008

Today we provided an operational and strategic update on GE Capital and how we are positioning the business for long-term growth. Here are the highlights:

GE Capital remains a invaluable part of GE’s portfolio, and we are fully committed to financial services.
We have made great progress in the last few months repositioning the business for long-term, double-digit growth – making our funding model safer and more diverse, reducing costs and exiting higher-risk businesses.
We have established a framework at GE Capital to earn approximately $5 billion in 2009. Positioned to return to double-digit earnings growth in 2010.
Total company fourth quarter 2008 earnings trending toward low end of guidance of $0.50 to $0.52 , excluding potential charges.
We also reaffirmed our commitment to paying a dividend of $1.24 in 2009, and we are committed to being a Triple-A company.

Reuters: Moody’s reaffirms GE’s Triple A

View a brief video recap with Bill Cary, chief operating officer, GE Capital.

Read the complete press release.

Watch the webcast replay.

virkant nagpal

The Press release looks as more of diplomatic rather than actual, As per me Ge Should make the policies to be clear

How Ge Capital will reorganise to be into profits and what measures it will take to reduce costs, is not clear to anyone from the above, GE should put more light on that front
David Cook

Re: GE Slideshow – 12/02/2008

On slide number 8, GE Capital Finance showed that it had Net Income of:
$ 12.2B in 2007,
$ 9.0B in 2008, and later (slide 37),
$ 5.0B in 2009 (est.).

Since GE has 13.4B in dividends to pay for 2009 (slide 49) and the finance unit normally contributes 50% — this would indicate that the rest of the business would have to contribute $8.4B in 2009 in order to just pay dividends. However (also slide 49), it is noted that there will a $2-3B surplus.

So, that implies a contribution of $10.4B – $11.4B from the rest of the business. It seems unlikely that GE can keep the rest of their businesses producing $11B in 2009.

So, if you take the $13.4B in dividends, then subtract the $300M paid to Buffet, and divide by the dividend of $1.24 — you come up with the number of common shares = 10,565M shares.

Now, take the slide 49 total of $15.4B – $16.4B and divide by 10.565M shares and you have the new "earnings per share estimate" for 2009. That number is $1.46 – $1.55 per share.

In other words — far below the "street" and a dividend coverage of just 1.2/1. Pretty meager. If you also convert the $300M Buffet payment to "equivalent common shares" (300M/1.24=242M) – the total equivalent shares would be 10.807M. This gives an equivalent shares estimate of $1.42-$1.52 per share. Real average dividend coverage is 1.185/1. Even worse.

So, it looks like the 50% contribution to earnings will shrink to around 35% (if the rest of the businesses hold up and the currency conversion is not to bad). It seems unlikely that the rest of the business will grow in 2009 — so, it is possible that there will be a dividend coverage of only 1/1.

If GE comes out with a different number, I hope they will explain in their upcoming update.
Charles

We are living in a time when most people DO NOT have a clue what is going to happen next. Big well-known companies are going tits up. Who would of thought?

At this point don’t ask "what now"….because then it will be too late…ask "what if". "What If?"….Cut the dividend, protect the core, ride out the storm. My 5000 shares of GE were bought as a long-term investment as with most GE investors….dividends are always nice but not necessary. No time to waste in 2009, do it swiftly.