GE

General Electric Reveals Order Strength; Registers Record Backlog

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General Electric (GE) put up a darling of an order number Friday with its third-quarter financial results. Though revenue and operating income faced pressure during the period due to asset reductions at GE Capital and foreign-exchange headwinds, the industrial conglomerate’s order performance was off the charts: US orders jumped 18%, Europe orders advanced 17%, and growth market orders leapt 22%. Needless to say, the global business environment improved significantly during the third quarter, and we’re not sure the threat of a US government shutdown (and by extension, the shutdown itself) did much to impede the business of global industrial conglomerates. GE’s backlog of equipment and services at the end of the quarter was its highest ever at $229 billion (up … Read more

MAKO Receives a Tremendous Offer from Stryker; Is Intuitive Surgical Next?

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The M&A flurry continued Wednesday morning as medical devices giant Stryker (click ticker for report: ) announced it would acquire MAKO Surgical (MAKO) for $30 per share, or roughly $1.65 billion. The deal represents an 83% premium to MAKO’s Tuesday closing price, but the value remains below MAKO’s peak in late 2011 and early 2012. MAKO remains unprofitable, though the firm has experienced solid revenue expansion during the past few years, going from $34 million in revenue during 2009 to $103 million during 2012. The firm isn’t expected to earn a profit in 2013, though revenue is estimated to jump 23% from the year-ago period. Given existing conditions, MAKO might not turn a profit until at least 2015, in our … Read more

Joy Global: Business Is Bad and Getting Worse; Share Buybacks Are Value Destructive

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The Power of a Valuentum Buying Index (VBI) Score of 1–the worst possible measure Mining equipment maker Joy Global (click ticker for report: ) posted lackluster results Wednesday for its fiscal year 2013 third quarter. Competitor Caterpillar (click ticker for report: ) posted similarly weak results as it deals with many of the same weakening global trends that are impacting Joy Global. During the period, Joy Global’s revenue declined 7% year-over-year to $1.3 billion, though that was better performance than consensus estimates predicted. Excluding items, earnings per share fell 9.1% year-over-year to $1.70, which was also slightly above consensus estimates. Free cash flow was actually better than the prior-year quarter at $320 million, equal to 24% of total revenue. Image … Read more

Why We Didn’t Get Excited About First Solar

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Tuesday afternoon, solar panel maker First Solar (click ticker for report: ) announced disappointing second-quarter results, confirming some of the issues we have long held with its business. Valuentum subscribers know that we don’t like the firm’s long-term prospects considering the industry’s ultra-competitiveness and First Solar’s forecast of weak gross margins. During the quarter, revenue at First Solar declined 46% year-over-year, to $520 million, more than $200 million short of consensus estimates. Earnings per share were 71% lower than a year ago, coming in at $0.37, again well below consensus expectations. Free cash flow was also materially weaker, registering $168 million (down 49% year-over-year) and equal to 32% of revenue. Image Source: FSLR 2Q 2013 Earnings Slides The situation for … Read more

Boeing’s and United Technologies’ Second Quarters Reinforce Strength in Aerospace

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On Wednesday, Boeing (click ticker for report: ) reported better-than-consensus top and bottom line results for its second quarter. Revenue advanced 9% thanks to higher deliveries of the 787 Dreamliner and the workhorse 737 platform, while backlog grew to a record $410 billion (nearly 5 times expected 2013 revenue), including $40 billion of net orders during the quarter. Core earnings per share jumped 13%, as operating cash flow (before pension contributions) more than doubled, to $3.5 billion. Free cash flow generation in the period was just over $3 billion, or nearly 14% of revenue. Management raised its 2013 revenue outlook to the range of $83-$86 billion thanks to improved performance in its ‘Defense, Space, & Security’ segment and upped its … Read more

General Electric and Honeywell Post Strong Second Quarter Results

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On Friday, industrial conglomerates General Electric (click ticker for report: ) and Honeywell (click ticker for report: ) reported strong respective second-quarter results (GE’s press release; Honeywell’s press release). Though we liked that Honeywell raised the low end of its 2013 earnings per share guidance range, the most important takeaway from their respective second-quarter performances, in our view, was the significant growth in GE’s backlog of equipment and services, which advanced to $223 billion at the end of the quarter. We think such expansion bodes well for many firms across the industrial/energy space, from oil/gas to commercial aviation. Image Source: GE GE’s second-quarter revenue missed consensus expectations, but the firm’s bottom line came in slightly better than what the Street … Read more

House Defense Appropriators Ignore Sequestration

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To download the 155+ page fiscal 2014 Defense Appropriations bill, please click here. On Tuesday, the House Appropriations Committee released the subcommittee draft of the fiscal year 2014 Defense Appropriations bill. The bill provides for $512.5 billion in non-war funding, an amount that completely ignores the level that would be caused by automatic sequestration spending cuts (to the tune of over $28 billion). The House’s proposal is also $5.1 billion below fiscal 2013 levels and $3.4 billion below President Obama’s request. In any case (whether the bill in current form is implemented or if sequestration takes hold and further spending cuts are put in place), the trajectory of defense spending for fiscal 2014 relative to fiscal 2013 is down. The … Read more

Boeing Keeps Raking in Aircraft Orders

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Boeing (click ticker for report: ) updated its ‘Orders and Deliveries‘ page on its website this week, and we were pleased to see a nice uptick in orders. We keep a close eye on commercial aircraft orders as the pace remains a key driver of sentiment within the aerospace industry, even though Boeing and Airbus are effectively “sold out” for at least the next 12 months. According to the disclosure, the plane-maker has booked roughly 428 net orders through May 21 of this year, which puts the aerospace giant well on its way to achieving a book-to-bill north of 1 (signaling backlog expansion). Though our positive thesis on the aerospace supply chain–AAR (AIR), Astronics (ATRO), Rockwell Collins (COL), HEICO (HEI), Hexcel Corp (HXL), Precision Castparts (PCP), Spirit AeroSystems (SPR), … Read more

GE Posts Another Record Backlog, But Organic Growth Falters

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Industrial conglomerate General Electric (click ticker for report: ) reported solid first-quarter results marked by a record backlog of $216 billion. Revenue was flat year-over-year at $35 billion, which modestly exceeded consensus expectations. Earnings, excluding the positive impact of the sale of NBCUniversal, grew 17% year-over-year to $0.35 per share, slightly better than consensus estimates. In spite of decent backlog growth, weakness in its Power and Water division and lackluster results in Oil & Gas weighed on performance. The Power and Water segment was particularly challenged, as revenue dropped 26% year-over-year to $4.8 billion driven by a 42% decline in equipment revenue. The firm focused on cost-cutting efforts in order to preserve margins, but segment profitability still fell 39% to … Read more

GE Pays Up For Fracking Exposure

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Earlier this morning, The Wall Street Journal reported that GE (click ticker for report: ) will acquire oil pump manufacturer Lufkin Industries (click ticker for report: ) for a whopping $3.3 billion, or $88.50 per share in cash. Paramount to any acquisition is the price paid, and we think GE paid a hefty sum to gain exposure to the US hydraulic fracturing market, paying a 20% premium to the high-end of our fair value range and a price 38% higher than Lufkin’s closing price on Friday. We understand the attractiveness of the energy business, as well as the potential synergies from incorporating the business into GE’s existing portfolio, but paying over 25x 2013 earnings for a firm that hasn’t generated … Read more