General Electric: 3 Pros, 3 Cons

Rocked by nuclear headlines, will GE's shares plunge further -- or are they a buy?

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It sells everything from aircraft engines to consumer appliances to railroad locomotives and medical equipment, but over the past week the world has been focused on General Electric’s (NYSE: GE) nuclear reactors. As the crisis situation at Japan’s Fukushima power plant escalates, General Electric has found itself at the fulcrum of the crisis. That’s because GE, along with Japanese conglomerate Hitachi Ltd. (NYSE: HIT), designed all six of the reactors at the troubled plant four decades ago.

Not surprisingly, GE stock has been pummeled in recent trade. As of March 17, the stock was down nearly 9% from its recent high. The weakness in the Dow component has helped bring stocks down so far that, as of this writing, all of the market’s 2011 gains have been wiped away.

So, what’s next for GE stock? Will the current bout of selling be only a blip on the long-term radar, ultimately resulting in a great buying opportunity in the stock at current levels? Or, does the current sell-off represent the beginning of a protracted decline in the once-mighty conglomerate’s shares?

Here are three pros, and three cons of GE stock:

GE Stock Pros

Diversification mitigates nuclear damage. GE is a huge and extremely diversified company. That means the loss of any future revenue (or potential financial liability from the Fukushima crisis) will likely be minimal. In fact, GE’s nuclear unit accounted for about $1 billion, which doesn’t seem trivial until you realize that the company posted total revenue in 2010 that was north of $150 billion.

Diesel and gas turbine boost. GE is a major supplier of diesel and gas turbines, and that could be precisely what’s needed to help a power-stricken Japan recover from the devastation of the earthquake/tsunami/nuclear meltdown. GE actually has the biggest market share globally in the gas turbine business, and an increase in this source of power could very well offset any losses from its nuclear division.


Article printed from InvestorPlace Media, http://investorplace.com/2011/03/general-electric-ge-stock-pros-cons/.

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