GE’s Immelt Should Finally Get His Due

For most of the past decade, investors have complained that Jeffrey Immelt is
no Jack Welch. While the General Electric (NYSE: GE ) CEO has not equaled the
performance of his legendary predecessor, he finally should get some respect of
his own from Wall Street. GE, which is based in Fairfield, Conn., has had five
consecutive quarters of double-digit earnings growth. The company's backlog of
industrial orders rose to $189 billion in the second quarter thanks to gains in
infrastructure, equipment and services orders. Profit at GE Capital more than
doubled as the unit underwrote more profitable loans. Results were not hurt too
badly by Immelt's decision to unload NBC Universal to Comcast (NASDAQ: CMCSA
). Total revenues fell only 4% to $35.6 billion. Excluding NBC Universal,
revenues would have jumped 7%. Analysts are forecasting long-term EPS growth
rates of 15%. Although the company reported better-than-expected results and
gave bullish earnings guidance, its stock recently has tanked. Shares are down
more than 22% over the past 22 weeks as investors fretted about the broader
economic slowdown. Though not immune from the languid pace of the U.S. recovery,
the sell-off was overdone. It does not reflect GE's strength in its aviation,
health care and transpiration businesses. The shares are now ridiculously cheap
. GE trades at a price-to-earnings ratio of 12.25, which is around the lowest
it's been in the past five years. The S&P 500, by the way, has a multiple of
15.29. GE's dividend yields 3.81% versus 2.21% for the broad market index. GE
is well situated to take advantage of growth in emerging markets. For instance,
it announced a $600 million order from Malaysia's AirAsia BHD during this
summer's Paris Air Show. In July, the company announced plans to move its
X-ray business from the United States to Beijing to more easily tap into
fast-growing health care markets in China . Energy should continue to do well
this year, fueled by a 17% growth in unit volume expected in the second half of
the year. Demand for GE's wind turbines also should continue to be robust
because of the growing use of renewable sources of energy. Germany, Europe's
largest economy, should continue to be a good customer because of the
country's decision to quit using nuclear power by 2022 . Even GE Capital, long
a laggard, has improved . During the most recent quarter, profit from continuing
operations more than doubled to $1.66 billion as revenue fell 1% to $12.4
billion. GE has narrowed to primarily commercial finance. Many investors,
though, remain angry about Immelt's missteps, such as selling the plastics
business after it had become commoditized. Others are not thrilled that GE has
retained its appliances business after failing to find a buyer after a 2008
strategic review. Of course, the road ahead for GE is difficult. But investors
can take comfort in knowing that the company and its CEO seem up to the
challenges it faces. Jonathan Berr does not own shares of the companies listed.
Follow him on Twitter at @jdberr.