General Electric Earnings Preview: What to Expect from GE Stock

General Electric Co. (ticker: GE) has made several moves recently that should make for some interesting reading in its fourth-quarter earnings report this week.

GE acquired Alstom, a French turbine maker, for $10.6 billion in November, liquidated many of its GE Capital assets and won a contract valued at $1 billion to build a power plant in Saudi Arabia.

More recently, the company said it would slash about 6,500 jobs as part of the Alstom acquisition and, much to the chagrin of people in Fairfield, Connecticut, move its headquarters to Boston. It will sell its real estate assets in Fairfield and New York City -- at 30 Rockefeller Plaza -- to fund the move.

With all of the moves the company made in the three months that ended on December 31, GE is well-positioned to meet or top expectations when it releases its earnings report, analysts say.

The company is expected to report revenue of $35.9 billion and earnings of 50 cents a share when it reports earnings on Friday. That would be an improvement even over its third quarter, when it recorded revenue of $31.7 billion and earnings per share of 25 cents.

"There's every reason to think they can deliver" on their forecast earnings and revenue, says Brian Langenberg, a principal with Langenberg & Co. in Chicago. "What I'm going to look for is what they say about their order book, about rising orders and falling orders and how firm their backlog is. What's going to drive the stock is how effectively and how quickly they integrate Alstom, and how quickly they can buy back stock. Those are the big things we'll be looking for."

Divestiture of GE Capital units may improve earnings. GE has been making moves that position it well for the future, according to financial analysts who cover the company.

First and foremost is its divestiture of several GE Capital units, as the company tries to reduce its footprint in the finance business. The company sold a large part of its commercial lending business to Wells Fargo & Co. (WFC) in October, at the time its largest divestiture on record.

GE sold off about $146 billion in capital assets in 2015, about two-thirds of the $200 billion it plans to divest. Most of the remaining GE Capital assets are overseas. The company expects a dividend of about $2.5 billion from GE Capital in the fourth quarter.

The move out of the commercial lending business has been welcomed by analysts, who say it wasn't a good fit from the beginning, though the company's been in the space for quite some time.

"GE is progressing away from GE Capital and toward milestones it set up for accomplishing its longer-term strategy," says Barbara Noverini, an equity analyst at Morningstar in Chicago. "Generally, going forward, (the company will) be looking at higher-quality earnings because of its divestiture of GE Capital."

The Alstom acquisition will help expand GE's global presence. The Alstom acquisition, GE's largest-ever industrial purchase, is also considered a good move by analysts, who say it will help GE expand its global presence. The move wasn't easy -- it took regulatory approval in more than 20 countries including the U.S., China and India.

At the time, GE said it expected the deal would push 2015 earnings down 1 to 2 cents, but generate 5 to 8 cents per share in earnings in 2016 -- and that would rise to 15 to 20 cents per share by 2018. Chief Executive Officer Jeff Immelt says the purchase "another significant step in GE's transformation."

On a conference call with investors last month, Chief Financial Officer Jeffrey Bornstein said the company will have about $130 billion in revenue, and has a backlog of more than $300 billion.

"I don't think the company has ever been better positioned for an integration than we are with Alstom," Bornstein said during the call.

As part of the Alstom deal, GE will reportedly eliminate 6,500 jobs in Europe. The cuts represent 14 percent of those employed by GE's power and water division in Europe.

GE is making plans for Boston. GE is planning to move its corporate headquarters from Connecticut to Boston, which it chose over 40 other cities because of its access to talent, long-term costs, quality of life and international connections. The company doesn't expect any financial impact from the move.

Workers will begin moving to a temporary site in 2016 and the move is forecast to be completed by 2018.

Though it wasn't announced until after Jan. 1, Langenberg says it's likely the company still will make a mention of the move during its earnings call. GE is also expected to offer details of the recent sale of its appliances business to Qingdao Haier Co. for $5.4 billion.

Haier will be allowed to continue using the GE Appliances brand name and remain at its headquarters in Louisville, Kentucky. At closing expected this year, the deal is projected to generate an after-tax gain of about 20 cents per share.

Looking forward, how GE navigates what recently have become rough economic waters -- thanks in no small part by uncertainty over China's economy and a plunge in crude oil prices -- will determine if it can sustain the growth path on which it has found itself, Morningstar's Noverini says. "While it's shaping up to be tough 2016 for the sector, GE has competitive advantages in place that will help it manage the year well and continue to execute."

Whether the company beats on earnings or revenue isn't as big a deal as how it handles all of its divestitures and acquisitions in the coming months, Langenberg says. He has a $30 price target on GE stock and gives it a "hold" rating because of recent uncertainty in China and declining oil prices -- but he says it could go higher in late 2016 or beyond. "There's no reason this can't be $40 stock in the long term."

Tony C. Dreibus has been a financial journalist for more than 15 years, working for Bloomberg News and The Wall Street Journal. He's covered everything from gold to agriculture to food prices.