M.faroux

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UBS Wealth Management Research / 13 October 2008

Corporate Update
Lowered earnings bar met; Hold
Stock rating: Hold Share price: USD 21.50 USD 27 Estimated fair value range: USD 23 Issuer credit rating: AAA (Credit Trend: Stable) View versus MSCI US Capital Goods: Marketperform At a glance General Electric's 3Q 2008 EPS of USD 0.45 met the consensus. Weak results from the financial segment offset healthy sales and order growth from the industrial units. We cut our 2008E-2009E EPS and EFVR (from USD 27-33 to USD 23-27). Our Hold/sector Marketperform ratings for GE's stock and 'AAA' credit rating/'Stable' credit trend for its bonds are unchanged. Stock view: Weaker outlook General Electric's 3Q 2008 earnings of USD 4.5bn fell 12% year-overyear. The finance unit's income dropped 33%, hurt by higher loss provisions. Conversely, the industrial business posted solid organic sales growth of 10% and rising orders, which boosted the backlog 20%. Profits rose 31% at the Energy Infrastructure unit, as sales of power plant equipment rose; 10% at NBC Universal, which benefitted from the Summer Olympics; and 2% at Technology Infrastructure, which sells jet engines. Earnings declined 82% at the Consumer and Industrial business, which makes lighting and large appliances. The company plans to spin off this unit in 2009. We lower our 2008E-2009E EPS (from USD 2.00-2.00 to USD 1.90-1.72) and our EFVR (from USD 27-33 to USD 23-27). We expect further finance segment weakness and moderating industrial growth through 2009. Credit view: AAA still We maintain our 'AAA' credit rating and 'Stable' credit trend for General Electric. In our view, its robust credit quality reflects leading global market positions across a broad range of products and services, strong free cash flow generation, and financial flexibility. We believe the finance unit's business model remains sound despite our expectations for higher delinquencies and loan loss provisions in 2009, leading to lower

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