Can boeing and ge recover

Can Boeing and General Electric Recover in 2014?

Boeing and General Electric are lagging the Dow

The Dow Jones Industrial Average has risen steadily in 2014, but Boeing and General Electric are both in the red, lagging the 28 other Dow components.• One reasons is Boeing’s performance a year ago. The stock was up 81% last year and may have gotten overvalued. • GE is slowly divesting financial assets and has been acquiring energy assets in 2014.

Boeing is fighting high expectations

Boeing’s drop early this year was due to high expectations after last year’s run. Shares dropped in January after management predicted flat profits in 2014. With shares trading at 22 times earnings, more growth was expected.

Orders keep coming

The long-term investment thesis keeps getting better for Boeing. • First quarter revenue was up 8% to $20.5 billion. • Core operating earnings jumped 12% to $2.1 billion. • Backlog was $440 billion, including $19 billion added in Q1.• Last week alone, Boeing confirmed $40.2 billion in orders.

• Boeing’s market outlook predicts that commercial airplanes will double to 42,180 in service by 2033. • Orders are predicted to be worth $5.2 trillion.

Slow going in 2014

The Dow Jones Industrial Average has risen steadily in 2014, but Boeing and General Electric are both in the red, lagging the 28 other Dow components.• One reasons is Boeing’s performance a year ago. The stock was up 81% last year and may have gotten overvalued. • GE is slowly divesting financial assets and has been acquiring energy assets in 2014.

General Electric transitions its business

General Electric is transforming its business from high exposure to financials to a focus on industrial products that were formally its core. CEO Jeff Immelt has targeted 70% of revenue from industrials.• The transition is tough, but results are starting to improve.• Second-quarter industrial revenue grew 10%, including 6% organically. • The acquisition of Alstom solidifies GE’s position in energy.

The IPO of GE’s credit card business

GE recently announced plans for the IPO of its credit card business. • GE will sell $3.25 billion of stock in its credit card business IPO and retain majority ownership worth about $17 billion. • Over time, it will divest more of the stock, further reducing exposure to financials.

GE’s core is getting stronger

As GE makes this transition, it’s betting on the right industries. • CEO Jeff Immelt has made huge bets on energy and aviation, which are both doing well. • Oil and gas revenue was up 20% in Q2, and segment profit rose 25%. • Aviation revenue jumped 15%, and segment profit rose 12%. • GE is benefiting from macro trends of the rise in energy production outside of traditional markets and a boom in commercial aviation.

Boeing and GE are down but not out

Boeing and GE are both lagging the Dow, but their businesses are fundamentally strong.

• Boeing will continue to benefit from the rise in commercial air travel around the world. • General Electric’s bet on energy and aviation will pay dividends for years go come. • Investments in wind and solar are just beginning to show fruit.

• Neither stock is cheap at 22 times trailing earnings, but for long-term investors, this underperformance will be temporary.

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