After reporting lackluster third quarter 2013 results, diversified conglomerate General Electric Company’s (GE) full year 2013 results also failed to cheer the market. The company reported mixed 2013 results on Friday.
What disappointed the investors most was that the company failed to deliver its promises on profit margin. Investors dumped GE shares resulting in a 2.28% fall in its share price at the close of the trading session to finish last week.
General Electric Earnings in Focus
The company nevertheless reported strong fourth quarter 2013 results, wherein earnings per share (EPS) jumped 20% year over year to 53 cents, while revenues improved 3% year over year to $40.4 billion. Though the figures were higher year over year, they were in line with the Zacks Consensus Estimate.
Strong Oil and Gas as well as Aviation sectors helped the giant to match expectations.
For 2013, while the company managed to match the EPS consensus, revenues marginally missed the mark.
However, part of the main issue for the firm was that the company had a target to improve profit margins by 0.7% for the full year, though it only produced a 0.66% improvement instead. While this wasn’t a big miss by any means, it did point to supply disruptions at the company’s wind turbine business, and poor energy management results as some stumbling blocks for the company.
The miss on margins overshadowed the company’s 5% jump in operating profits. This was due to the fact that the company’s CEO was increasingly focusing on the growth of the Industrial segment while shrinking its exposure to its Finance unit. The failure to meet this target dashed investors’ hopes.
Though the company has announced its intention to shrink its Finance business by 2015 and realign the company to a manufacturing entity, investors should keep an eye on the company’s share price movement.
GE’s share prices were trading 0.04% lower at $26.57 after market hours, over and above the 2.28% fall in market hours.
ETFs to Watch
As such, ETFs that are heavily invested in this diversified conglomerate could be impacted in the next few trading sessions. Below, we have highlighted four Industrial Equity ETFs with a double-digit allocation to GE. These ETFs have suffered some losses in yesterday’s trading session and have been brought into focus following GE’s earnings release.
MSCI Industrials Index ETF (FIDU)
This ETF has the largest exposure (11.60%) to GE. The fund tracks the MSCI USA IMI Industrials Index and holds around 345 stocks in its basket.
Unlike GE’s shares, the fund dropped only 0.51% yesterday. This is due to the fact that the fund has exposure to other industrial stocks as well including United Technologies Corp. (UTX) – 4.27%, Boeing Co (BA) – 4.31% and 3M Co. (MMM) – 3.82%.
The fund has delivered flat-to-negative, year-to-date returns and charges 12 basis points from investors as fees.
Vanguard Industrials ETF (VIS)
VIS tracks the MSCI US Investable Market Industrials 25/50 Index and has 358 stocks in its basket. Out of these, GE occupies the top spot with 11.9% of the fund assets. Like the above ETF, the fund has almost the same exposure to UTX, BA and MMM.
The fund also lost around 0.52% on Friday and has retuned a modest 0.14% year to date. However, the fund charges 2 basis points more than FIDU.
Industrial Select Sector SPDR (XLI)
The product is the most popular industrial ETF and has an AUM of $9.7 billion. It tracks the Industrial Select Sector Index, holding a small basket of 66 stocks.
GE is the top holding of this ETF as well and forms 10.88% of total firm assets while BA, UTX and MMM take up the next three spots with a combined 15.6% share.
The fund charges 18 basis points a year in fees.
iShares U.S. Industrials ETF ((IYJ)
The fund tracks the Dow Jones U.S. Industrials Index, holding 219 stocks. While GE is the top company in the fund with 10.7% of assets, many other in-focus companies round out the rest of the top five. These include UTX, BA, MMM and Union Pacific Corp (UNP) as each of these account for at least a 3% share of the basket.
Both XLI and IYJ fell around 0.5% after GE’s results were released. The ETF currently has a Zacks ETF Rank #2 or Buy rating.