General Electric First Quarter Results

  • GAAP loss of $1.18 billion or $0.14 per share vs. a 17Q1 loss of $0.12 billion or $0.01 per share.
  • This quarter’s loss included a $1.55 billion ($0.17 per share) charge representing the estimated cost of settling potential FIRREA charges with the U.S. Dept. of Justice.
  • GE’s 18Q1 adjusted industrial free cash flow was negative $1.68 billion, better than 17Q1’s negative $2.75 billion.
  • Consolidated revenues increased 7% to $28.7 billion, due to the acquisition of Baker Hughes. Industrial organic revenues declined 4% to $23.8 billion.
  • Segment profit fell 11% to $2.46 billion, due to declines at Oil & Gas, Power and GE Capital. However, after-tax earnings from continuing operations improved from $0.12 billion to $0.37 billion, due to lower corporate items and eliminations.
  • CEO John Flannery said that GE made a step forward in executing on its 2018 plan, with signs of progress in its performance. The company is on track to exceed its 2018 cost reduction goal of $2 billion and is proceeding with its planned $20 billion of dispositions for 2018 and 2019.
  • Under Mr. Flannery, GE may transition away from the conglomerate model toward becoming a federation of publicly-traded companies.

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Update on General Electric (GE)

On Friday (4/13), General Electric (GE) filed an 8-K that quantified the impact of adopting new accounting standards (and certain voluntary changes in accounting policies) on its previously reported results for 2016 and 2017.  In total, these changes reduce previously reported 2017 GAAP earnings by $2.79 billion or $0.32 per share and 2016 GAAP earnings by $1.23 billion or $0.15 per share.  The changes also reduce year-end 2017 assets by $8.7 billion and shareholders’ equity by $8.5 billion or $0.98 per share. Continue reading

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BXG 2017 Fourth Quarter Update

On March 6, Bluegreen Vacations (BXG) reported 2017 fourth quarter net earnings attributable to shareholders of $66.5 million or $0.93 per diluted share, compared with $25.6 million or $0.36 per share in the prior year quarter. Continue reading

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A Possible Early Sign of a Market Rebound

Last week, stocks fell sharply. The S&P 500 ended the week down 5.16% in price. The Lark Research Homebuilder Stock Price Index fell 6.02%, underperforming the broader market. Continue reading

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Up Big Since the IPO, Bluegreen Shares Still Have Upside Potential

Bluegreen Vacations (BXG) completed its IPO in November 2017. The company had been wholly-owned by BBX Capital (BBX). In the IPO, Bluegreen offered a total of 7.47 million shares (including, with the overallotment option, 3.74 million shares owned by BBX Capital) at a price of $14 share. Net of underwriting discounts, commissions and other expenses, the offering raised an estimated $95.8 million, of which $47.2 million was received by Bluegreen, the rest by BBX. On a pro forma basis (as of Sept. 30, 2017), the offering raised Bluegreen’s cash position to $171 million and its equity book value to $315.7 million. Bluegreen intends to use the proceeds for general corporate purposes, including increasing working capital, making acquisitions and developing new properties. Continue reading

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GE Preannounces Insurance-Related and Other Charges

GE announced this morning that it will take an after-tax charge of $6.2 billion in the 2017 fourth quarter against the value of GE Capital’s run-off insurance portfolio, North American Life & Health (NALH).  In addition, GE Capital will make $15 billion of statutory reserve contributions over the next seven years, including $3 billion in February and $2 billion annually from 2019 to 2024. Continue reading

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Notes on the 2017 Massachusetts Investor Conference (Part 2)

Affordable Housing. According to U.S. News and World Report, Massachusetts ranks as the best state in the nation in 2017, with top 5 scores in education, health care and economy. All around the state, there has been a resurgence in urban areas and revitalization of town centers. Massachusetts is a one of the most desirable places to live, but it is also one of the least affordable. Continue reading

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Notes on the 2017 Massachusetts Investor Conference (Part 1)

The Massachusetts economy is experiencing its most robust expansion since the late 1980s. Third quarter GDP growth was clocked at 5.9%, according to Mass Benchmarks. Leading indicators anticipate 2017 fourth quarter GDP growth of 3.3% and 2018 first quarter growth of 3.0%. Massachusetts’ unemployment rate was 3.9%, below the national average of 4.1%. Job creation has been strong and broad-based, except for manufacturing. Early in the recovery cycle, hiring was concentrated among white collar workers, but more recently, blue collar workers have been the primary beneficiaries of continued job growth. Continue reading

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Notes and Analysis From GE’s Investor Update

“You can’t grow long-term if you can’t eat short-term. Anybody can manage short. Anybody can manage long. Balancing those two things is what management is”
      -Jack Welch

As everyone knows, this has been a tough year for GE shareholders.  GE’s stock is down 40.8% year-to-date (thru 11/17) on a total return basis.  By comparison, the S&P 500 has delivered a 17.3% positive total return.  GE’s stark underperformance reflects both the decline in its earnings expectations – its 2017 operating EPS guidance (industrial operating + verticals) has been cut from $1.60-$1.70 at the beginning of the year to $1.05-$1.10 currently – and now the halving of the dividend.  2018 has been characterized as a “reset” year.  Management currently anticipates 2018 adjusted EPS of $1.00-$1.07, which is roughly half of the previous target of $2.00.  According to management, the change in performance and outlook reflects primarily sharply reduced expectations for GE’s Power business and continued weak performance in Oil & Gas and Transportation. Continue reading

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Notes and Analysis from HPE’s Analyst Meeting

Key takeaways:

  • Through its HPE Next transformation plan, HPE will spend $1.1 billion over the next two years to achieve annualized cost cuts of $1.5 billion by the end of 2020. It will reinvest about half of the savings to beef up global sales and marketing efforts.  HPE Next will streamline the company and make it more responsive to customers.
  • HPE’s key strategic emphasis is to accelerate growth by offering high margin services and solutions driven by its innovations in hybrid IT and the intelligent edge.
  • Management offered pro forma non-GAAP EPS guidance of $1.00 for 2017 and $1.15-$1.25 for 2018.
  • Longer term, HPE has set as targets 0%-1% annual revenue growth,4%-5% operating profit growth and 7%-9% EPS growth.
  • At 14.3 times pro forma 2017 EPS and 12.0 times projected 2018 EPS, HPE is cheap to the market and its peer group.

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