GE's Immelt Wins Back the Analysts
Sell-side analysts have gotten a lot less cheerleadery over the years in their conference calls with corporate executives. My (possibly exaggerated) memory of earnings calls in the late 1990s is that if a company beat estimates, almost every analyst prefaced his or her questions with a “great quarter, guys.” That doesn’t happen much anymore -- and probably hasn't since Eliot Spitzer waged war on the analysts and their happy talk as New York’s attorney general in the early 2000s.
When General Electric’s top executives got on the phone Friday to discuss their big plan to sell almost all of GE Capital, though, several of the long-suffering analysts who follow the company couldn’t restrain themselves from throwing in a congratulatory word or two. To be precise, five of the analysts said “congrats” or “congratulations,” one (Joe Ritchie of Goldman Sachs) hinted at such sentiments with a “Good morning, guys, and big move,” and five just jumped straight into their questions.
Then there was Andrew Obin of Bank of America. “I’m not allowed to congratulate,” he said. The recording gets a bit garbled after that, but you can also hear him say “as per compliance.” This translates to, “I would congratulate you, but I’m not allowed to.” Which kind of seems like the same thing as saying “congrats.”
Barclays Capital’s Scott Davis was among those didn't shy away from “congrats.” He also said some other interesting stuff. After sending journalists (including me) scurrying last month with a prediction that the departure of long-serving GE Chief Executive Officer Jeff Immelt “could come sooner (within a year or so) than later” and that Chief Financial Officer Jeff Bornstein “may now be a front-runner” to succeed him, Davis had this exchange with GE’s two Jeffs (as recorded in the Bloomberg transcript):
Scott Reed Davis: This is big stuff and I know we've all given a lot of crap over the years, but this is a pretty good step for redemption, so thanks for that. I -- that's my best apology I can make by the way. That's as good as I can get, and ...
Jeffrey S. Bornstein: OK.
Jeffrey R. Immelt: Well, thank you, Scott.
Scott Reed Davis: You can keep your job a little longer, I guess.
Jeffrey R. Immelt: Yeah. Good, good.
Obviously, Scott Davis won’t the one to decide whether Immelt gets to stick around for another five years. But sell-side analysts are a proxy, however imperfect, for the investor community. By getting ahead of their expectations in reshaping his company, GE’s CEO seems to have won not only goodwill but probably a bunch of breathing room. If, that is, one can actually measure market sentiment by the number of “congratulations” on an investor call.
The Thomson Reuters transcript that GE provides on its website has this as “Not a lot to congratulate,” but I’ve listened and that’s clearly not what he said.
Following the more conventional method of looking at analysts’ buy or sell recommendations, Bloomberg has GE at 12 buys, 10 holds and one sell. Also, for those who have no truck with sell-side analysts, the most popular story on Barrons.com right now is headlined "Time to Sell General Electric."
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