Friday, January 23, 2009

GE Shrinks

The first thing one notices about the GE earnings release today is the reader-unfriendliness of the title, along with the lack of information about the actual 4th quarter results:

"GE Earned $18.1B in ‘08; 4Q ‘08 Results in Line with December Outlook; Industrial CFOA of $16.7B up 5%; Cash on Balance Sheet Grew from $16B in 3Q to $48B at YE".

The next thing at least this scribe noted is the current GE motto: "Imagination at Work". In these times, we assume that the imagination relates to earnings manipulation.

In any case, we don't care much about earnings. We care a bit about outlook ("We expect 2009 to be extremely difficult."). We don't give a hoot about dividends, which can lie. We also don't care about a AAA rating. Clearly GE is in practice not a triple-A company, of which there are almost none left in America. (A headline today in suggests that France may stop being a AAA-rated country.)

What really matters here, as readers will have noticed, in this environment, is equity. Here's the real bad news. As of 12/31/08, GE had stockholder's equity after goodwill and intangibles of 8 billion dollars. A year early, the same number was 18.3 billion dollars. So the Company is down $10 B in tangible equity. Great year, guys! Keep paying out those dividends!

The corporation as a whole reports tangible equity of $8 B. GE Capital reports $365 B in net receivables.

At the close of business yesterday, GE had a stock market value of $134 Billion. Of this, $126 Billion is "air" under Generally Accepted Accounting Principles. Let Wall Street's geniuses with their valuation models pick fair value and a stock price target for this wheezing behemoth that even today is predicting double digit growth as soon as the recession ends. I can't even guess at what this company is worth. As far as I'm concerned, unthinkable though it sounds, this stock could have no bottom.

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