GE prepares for better times in 2010
General Electric is prioritising raising its dividend rather than making acquisitions with an anticipated pot of $25 billion cash which it expects to have by end of the year.
According to GE CFO Keith Sherin, the firm has very clear expectations and goals. "We would like to grow the dividend in line with earnings, that's the first priority," he said. "Beyond that, it's going to be opportunistic.With the dramatic changes we’ve made in the company in the past 18 months, the future outlook looks pretty good.”
For all that, Sherin expects the pace of mergers and acquisitions to pick up over the coming year. "CEOs and boards are thinking strategically about their future and their capital allocation, and M&A is going to pick back up off of the lows of the last 18 months," he said. "I think that's just true."
GE has reported fourth-quarter earnings and sales that beat analysts’ estimates. Profit from continuing operations fell 22% to $3.03 billion from $3.87 billion a year earlier. Sales fell 10% to $41.4 billion.
Sherin is confident that better times are ahead. “The outlook for 2010 is much better. Losses will be lower. Most of the portfolios in this business have stabilised already in terms of delinquency and lower non-earnings, and the outlook is pretty good with the new volume that we are originating.” he argued. “Losses should be stable, but our underwriting discipline that paid off in 2009 should continue to give us benefits as we have raised our underwriting standards and we've cut open lines to buy and we have been very disciplined on collections. Overall, the result here is going to depend on where unemployment goes.
“For global banking, the outlook is also better. Losses should be stable and we expect to benefit from the positive growth where we operate. CEE, Central and Eastern Europe, GDP growth should be over 2% in 2010 versus 2009 and that is good for these businesses. The UK mortgage is improving. We expect lower losses in 2010 as the market dynamics continue to improve. And for the verticals, we expect about flat performance.”
The Bottom Line:If Mr Cable has his way...
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