(PRWEB) June 6, 2005
With broad strokes, CEO Jeffrey Immelt, paints a rosy picture of GEÂs future, taking every opportunity to boast about GEÂs double-digit earnings growth, revenue growth and rebounding stock price. But a look behind the numbers suggests a much bleaker truth.
Since Immelt took the reigns of GE in 2001, General Electric has been on a bumpy ride. Its stock price tumbled from nearly $60 per share in 1999, to a low $21.30 per share in 2003. And the earnings growth, that predecessor Jack Welch worked so hard to build, slowed to a trickle, growing a mere 3% in 2002.
As Jeff is quick to point out, he did take the helm just days before the 9/11 attacks, and the impact that event had on the economy was beyond his control. Since that low point, Immelt has built revenue up to $152 million and posted double-digit earnings growth in 2004, the first time since before good-old Jack stepped down in 2001. GE stock is trading above $36 per share, and, more importantly, Jeff has improved the CompanyÂs balance sheet, slowly working down the massive debt build-up of the late 1990Âs to a somewhat more manageable debt-to-equity ratio of 3.4:1 at the end of 2004.
However, if GE has such Âphenomenal growth,Â as Immelt tells us, then why is its Return on Invested Capital (ROIC) continuing the downward trend that Welch started? Between 1992 Â 1999, investors saw GEÂs ROIC slide from 8.5% down to 7.24%. Under ImmeltÂs leadership, ROIC has worsened each year, down to 5.3% today.
ÂImmelt can take action now to prevent further slippage in GEÂs financial performance,Â claims Symonds, co-author of "Millionaire Manager, 5 Easy Steps to Profitability," and partner in one of the worldÂs largest Big Four Public Accounting Firms. ÂCompanies that train their employees how to use ROIC to manage the business have a much greater success rate over the long term.Â By giving employees the tools to impact results, they are empowered to make the right decisions and take ownership in the financial health of the business.
Symonds contends, Âuntil Immelt gets out of the Âearnings for the sake of earningsÂ mentality, the tail will continue to wag the dog, and GE wonÂt see any real growth in its profits.Â