Monday, December 01, 2008

General Electric (NYSE:GE): Could lower guidance tomorrow - Citigroup

Citigroup is out cautious on General Electric (NYSE:GE) saying GE Capital webcast could be forum to lower 2009 outlook. Firm maintains Hold rating and $16 tgt on the stock.

On 11/25 GE announced it will be holding a webcast on 12/2 to review GE Capital. The goal of the webcast is to review strategy, funding, liquidity, risk management and details behind the recently announced $2 billion cost reduction program at GE Capital.

Opportunity for GE to Lower 2009 EPS Expectations? — Firm believes the webcast could also serve as a venue to lower 2009 EPS expectations. Normally the coming year guidance is communicated by CEO Jeff Immelt at the late December meeting which is scheduled for 12/16 this year.

Historical Precedent For Guide Down — In prior years, when street estimates were too high, GE has held late Nov/Early Dec meetings and used them as a forum to lower expectations so the CEO could focus more on strategy, etc at the late Dec meeting. The likelihood of this being the case this year appear reasonably high given the short notice on the webcast and the unprecedented macro and financial upheaval. Cit notes they cut their ‘09 GE estimates on 11/14 to $1.65 and while numbers have drifted down since, the street is still at $1.75. Further, the risk to their below consensus estimate appears biased to the downside.

Notablecalls: Interesting call from Citi - something I would call research (or a research call). The stock has recovered nicely from the $12-$13 level and could get hurt on this call.

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