GE continues to be a bright light for investors

Taking Stock

Your Money

March 13, 2005|By ANDREW LECKEY

General Electric Co. has always been the largest individual holding in my portfolio. Should I keep it that way?

- G.C., via the Internet

This giant conglomerate with 11 operating segments and a history of creating shareholder value continues to offer cause for investor optimism.

Profits from its NBC television network and hit movies such as Meet the Fockers and Ray have been strong, as have its health care and transportation division results.

Chief Executive Officer Jeff Immelt predicts that, barring significant increases in raw material prices, earnings could increase as much as 17 percent this year. Heavy investment in research and development ensures a constant flow of products and services.

Immelt expects gains in GE's energy and transportation businesses. He predicts his company will sell goods and services worth hundreds of billions of dollars to China and India in the next few years.

But revenues have fallen at GE's energy division that sells natural-gas turbines and related products and services.

Shares of General Electric are down about 1 percent this year after gains of 18 percent last year and 27 percent in 2003.

GE's profit rose 11 percent to $16.59 billion last year, while acquisitions helped boost revenue by about 14 percent to $152.36 billion. During that year it acquired Vivendi Universal's U.S. entertainment assets and the British Amersham PLC bioscience and diagnostic company.

Because its enormous size makes it difficult to significantly increase revenue and earnings, GE is expected to grow through acquisitions.

The consensus rating of GE stock by the Wall Street analysts who track it is a "buy," according to the Boston-based First Call research firm. That consists of six "strong buys," 13 "buys" and three "holds."

Despite its many good points, GE has been criticized for sometimes being aggressive in its accounting and not being as transparent as it could be.

The company agreed to pay $1.1 million to settle Securities and Exchange Commission charges that its recently acquired InVision Technologies Inc. security business made improper payments to foreign governments. And it has encountered significant problems with incorrectly priced underwriting at its Employers Reinsurance Corp. business.

GE's earnings are expected to increase 14 percent this year, compared with the 16 percent increase predicted for all conglomerate companies, according to First Call. Next year's expected rise is 13 percent, versus 14 percent predicted industrywide.

Andrew Leckey is a Tribune Media Services columnist. E-mail him at yourmoney@tribune.com.

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