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Fall 2013

G.E. Case Study and Charting Assignment

Due Tuesday November 19th – Week #12

RUID: 145006622

NAME: Pramod Bharadwaj

Corporate History:

The birth of the incandescent light bulb in 1876 from the laboratory of Thomas Edison, an inventor from Ohio, prompted him to further study in the field of electronics. By 1890, Edison had amassed all his businesses and organized them to form the Edison General Electric Company. Prior to Edison’s company however, Elihu Thomson and Edwin J. Houston had already formed the Thomson-Houston Electric Company in 1879. Both companies became dominant in the field of electrical industry. However, as their businesses grew, it became increasingly difficult to create electrical devices that depended solely on their own technologies.

By 1892, these companies joined in a merger prepared by financier J.P. Morgan, to establish the General Electric Company. Its headquarters was stationed in Schenectady, New York.

General Electric was one of the original 12 companies included in the then newly-formed Dow Jones Industrial Average and has remained in the list until now.

General Electric also went beyond electronics and pursued investments in media broadcasting and aviation. In 1919, GE founded Radio Corporation of America to expand their ventures in the international radio industry. GE also endeavoured in television ventures by reacquiring RCA for NBC in 1986. The company also purchased Vivendi’s movies and television franchises in 2004. GE was also involved in the development of US aviation by creating the first US jet engine in 1942. GE Aviation is now part of GE Infrastructure, a subsidiary of General Electric.

Different areas of business:

GE is a diversified infrastructure and financial services company. Its products and services include aircraft engines, power generation, water processing, security technology, medical imaging, business and consumer financing and industrial products. The company serves customers in more than 100 countries. It has 232 manufacturing plants located in 38 states in the US and Puerto Rico and about 283 manufacturing plants located in 42 other countries.The company operates through eight business segments: GE Capital, power and water, aviation, healthcare, oil and gas, home and business solutions, energy management and transportation. The GE Capital segment offers a broad range of financial products and services worldwide. Its services include commercial loans and leases, fleet management, financial programs, home loans, credit cards, personal loans and other financial services. During FY2012, GE Capital provided approximately $107 billion of new financings in the US to various companies, infrastructure projects and municipalities. This segment operates through various product lines including: commercial lending and leasing (CLL), consumer, real estate, energy financial services, and GE capital aviation services.

The CLL products include loans, leases and other financial services to customers, including manufacturers, distributors and end-users for various equipment and major capital assets. These assets include industrial-related facilities and equipment; vehicles; corporate aircraft; and equipment used in several industries, including the construction, manufacturing, transportation, media, communications, entertainment and healthcare industries. The consumer product line offers a range of financial products including: private-label credit cards; personal loans; bank cards; auto loans and leases; mortgages; debt consolidation; home equity loans; deposits and other savings products; and small and medium enterprise lending on a global basis.

The real estate business offers a range of capital and investment solutions and finances. These include both equity and loan structures for acquisition, refinancing and renovation of office buildings, apartment buildings, retail facilities, hotels, parking facilities and industrial properties. The energy financial services offer structured equity, debt, leasing, partnership financing, project finance and broad-based commercial finance to the global energy industry. GE Capital Aviation Services provides financial products to airlines, aircraft operators, owners, lenders and investors. These products include leases, and secured loans on commercial passenger aircraft, freighters and regional jets; engine leasing and financing services; aircraft parts solutions; and airport equity and debt financing. The power and water business segment covers power plant products and services, including design, installation, operation and maintenance services. The segment primarily sells gas, steam and aero derivative turbines, generators, combined cycle systems, controls and related services, including total asset optimization solutions, equipment upgrades

and long-term maintenance service agreements to power generation and various other industrial customers. The company’s renewable energy solutions include wind turbines and solar technology. Its water treatment services and equipment include specialty chemical treatment programs, water purification equipment, mobile treatment systems and desalination processes. GE’s aviation segment offers products and services for the airframe manufacturers, airlines andGovernment agencies. It offers jet engines, aerospace systems and equipment, replacement partsand repair and maintenance services for all categories of commercial aircraft; for a range of military aircraft, including fighters, bombers, tankers and helicopters; for marine applications; and for executive and regional aircraft.The healthcare segment provides medical imaging and information technologies, medical diagnostics, patient monitoring systems, disease research, drug discovery and biopharmaceutical manufacturing technologies. The products include diagnostic imaging systems such as magnetic resonance, computed tomography and positron emission tomography (PET) scanners, X-ray, nuclear imaging, digital mammography, and molecular imaging technologies. In addition, the segment offers technologies which include patient and resident monitoring, diagnostic cardiology, ultrasound, bone densitometry, anaesthesiology and oxygen therapy, and neonatal and critical care devices. The medical diagnostics and life sciences products include diagnostic imaging agents used in medical scanning procedures, drug discovery, biopharmaceutical manufacturing and purification, and tools for protein and cellular analysis for pharmaceutical and academic research, including existing and a pipeline of precision molecular diagnostics in development for neurology, cardiology and oncology applications.The oil and gas segment supplies mission critical equipment for the global oil and gas industry. The equipment are used in applications covering the entire value chain from drilling and completion through production, liquefied natural gas (LNG) and pipeline compression, pipeline inspection, and including downstream processing in refineries and petrochemical plants. The segment also designs and manufactures surface and subsea drilling and production systems, equipment for floating production platforms, compressors, turbines, turbo expanders, high pressure reactors, industrial power generation and a wide portfolio of auxiliary equipment.The home and business solutions segment offers major appliances and related services for products such as refrigerators, freezers, electric and gas ranges, cooktops, dishwashers, clothes washers and dryers, microwave ovens, room air conditioners, residential water systems for filtration, softening and heating, and hybrid water heaters. In addition, the company also manufactures certain products and also source finished product and component parts from third-party global manufacturers. These products are distributed both to retail outlets and direct to consumers, primarily for the replacement market, and to building contractors and distributors for new installations. The company also manufacture, source and sell a variety of lamp products for commercial, industrial and consumer markets, including full lines of incandescent, halogen, fluorescent, high-intensity discharge, and light - emitting diode, automotive and miniature products. The products and services are sold in North America and in global markets under various GE and private label brands including GE Monogram, GE Profile, GE, Hotpoint and GE Cafe.The energy management segment is GE’s electrification business. The segment designs technology solutions for the delivery, management, conversion and optimization of electrical power for customers across range of energy-intensive industries. It manufactures electrical distribution and control products, lighting and power panels, switchgear and circuit breakers that are used to distribute and manage power in a variety of residential, commercial, consumer and

industrial applications. In addition, the segment also provides plant automation hardware, software and embedded computing systems including controllers, embedded systems, advanced software, motion control, operator interfaces and industrial computers.GE’s transportation segment is a global technology supplier to the railroad, mining, marine andDrilling industries. GE provides freight and passenger locomotives, diesel engines for rail, marine and stationary power applications, railway signalling and communications systems, underground mining equipment, motorized drive systems for mining trucks, energy storage systems, information technology solutions and replacement parts and other value added services. In addition, it manufactures high-horsepower diesel-electric locomotives, including the Evolution Series. It also offer drive technology solutions to the mining, transit, marine and stationary, and drilling industries.

SWOT ANALYSISGeneral Electric (GE) is a diversified industrial corporation. A broad product portfolio and revenue stream reduces the business risks and provide cross selling opportunities, which in turn enables the company to tap opportunities in new as well as existing markets. However, challenging macroeconomic and political environment in the US and Europe could impact GE’s sales volume and overall business growth in the short term.

StrengthsDiversified product portfolio and revenue stream provides cross selling opportunities GE is one of the largest and most diversified infrastructure and financial services corporations in the world. The company is well diversified both in terms of business operations and end markets that it serves. It operates through eight business segments: GE Capital, power and water, aviation, healthcare, oil and gas, home and business solutions, energy management and transportation. TheGE Capital segment offers a range of financial products and services, including commercial loans and leases, fleet management, financial programs, home loans, credit cards, personal loans and other financial services. The power and water business segment covers power plant products and services, including design, installation, operation and maintenance services. The aviation segment offers products and services for the airframe manufacturers, airlines and government agencies. Furthermore, the healthcare business segment provides medical imaging and information technologies, medical diagnostics, patient monitoring systems, disease research, drug discovery and biopharmaceutical manufacturing technologies. Similarly, the oil and gas segment deliveries mission critical equipment for the global oil and gas industry. Additionally, GE’s home and business solutions products are comprised of major appliances and related services for products such as refrigerators, freezers, electric and gas ranges. Also, GE operates energy management. The segment designs technology solutions for the delivery, management, conversion and optimization of electrical power. GE’s transportation segment is a supplier to the railroad, mining, marine and drilling industries. In addition to the diversified product portfolio, the company has developed a balanced revenue stream. For instance in FY2012, GE Capital, the company's largest business segment, accounted for 31% of the total revenues, followed by power and water (18.7%), aviation (13.3%), healthcare (12.6%), oil and gas (10.3%), home and business solutions (5.5%), energy management (4.8%) and transportation (3.9%). Thus, broad product portfolio and revenue stream reduces the business risks and provide cross selling opportunities, which in turn enables the company to tap opportunities in new as well as existing

markets. In addition, it also helps the company to balance revenues in the face of a slowdown in a particular segment.

Successful inorganic growth strategyIn the recent past, GE has successfully adopted inorganic strategy to further enhance its overall competitiveness in the marketplace. For instance, in 2013, in order to aggressively expand into online banking and further reduce its reliance on potentially volatile financial markets for funds, GE Capital acquired the deposit business of MetLife Bank, an online banking platform with approximately $6.4 billion in US retail deposits. Similarly, GE recently acquired Dresser, Inc. which broadened its product portfolio with technologies for gas engines as well as its oil and gas product portfolio with control and relief valves, measurement, regulation and control solutions for gas and fuel distributions. Additionally, GE expanded its portfolio of flexible subsea risers and flow lines by acquiring Wellstream PLC and the Well Support division of John Wood Group. Within the energy management business, GE significantly enhanced its product and service capabilities in power electronics, industrial automation and process controls by acquiring Lineage Power Holdings and Converteam. Furthermore, in the end of 2012, GE agreed to purchase the aviation business of Avio S.p.A., an Italy-based manufacturer of aviation propulsion components and systems for civil and military aircraft, for $4.3 billion. During the same period, GE’s transportation segment completed the acquisition of Industrea, a provider of mining products and services with a focus in underground mining. Thus, by focusing on the inorganic growth strategy, GE has been able to successfully expand its product offering to better cater to the evolving requirements of its customers in the marketplace. This in turn supports the company in further diversifying its revenue base as well as in maintaining competitive advantage over its peers. Robust research and development capabilitiesGE Global Research (GGR), the research and development (R&D) arm of GE, is one of the world’s most diversified industrial research labs. GGR’s diverse set of technology expertise covers range of fields such as electronics, chemistry, biosciences, computing, metallurgy, fluid mechanics, materials and imaging, among others.GGR is headquartered in Niskayuna, New York and has three other multidisciplinary facilities inBangalore, India; Shanghai, China; and Munich, Germany. GGR has won various recognitions inrange of fields. For instance, a team of researchers from GGR won award for their work on development of crowdsourcing software platform. The team built a new, cloud-based, software platform that enables a global community of experts to share ideas, design, and build complex cyber-physical systems securely on the Internet. Furthermore, GE spends significant amount of its capital towards its R&D activities. The company funded R&D expenditures of $4,520 million in FY2012, $4,601 million in FY2011 and $3,939 million in FY2010. This represented more than 3% of the total revenues generated by the company. Strong R&D capabilities enables the company to bring new and innovative products to market and maintain technological leadership, which in turn enables GE to expands its customer base and generate incremental revenues.

WeaknessesHigh indebtedness exposes to credit risk GE’s significant debt level and related debt service obligations could negatively impact its operations. Since last few years, even though GE has been able to bring down its leverage level, it still has significant amount of externally borrowed funds. As at FY2012, the company had

approximately $236 billion in long-term borrowings which resulted in debt to equity ratio of 1.83. With significant indebtedness the company has experienced downgrades from various credit rating agencies. For instance, in April 2012, Moody’s Investors Service downgraded the senior unsecured debt rating of GE by one notch from Aa2 to Aa3 and the senior unsecured debt rating of General Electric Capital Corporation (GECC) by two notches from Aa2 to A1. This downgrade could have a negative impact on the company’s cost of funds. Furthermore, as the company dedicates significant cash flow from operations for the payment of principal and interest on the debt, which would reduce the funds available for other purposes such as acquisitions, capital investment and stock repurchases. Hence, if the company fails to check the high level of debt on its books it could experience adverse impact on its source of liquidity as well as on its overall financial flexibility. Further, high debt could have an adverse effect on GE’s liquidity position and may hamper its credibility in the market.

Dependence on third parties for raw materialsGE is reliant on third-party suppliers, contract manufacturers and service providers and commodity markets to secure its raw materials, parts, components and sub-systems used in its products. This reliance exposes GE to volatility in the prices and availability of these materials, parts, components, systems and services. A disruption in deliveries from the company's third-party suppliers, contract manufacturers or service providers, capacity constraints, production disruptions, price increases, or decreased availability of raw materials or commodities, could have an adverse impact on GE's ability to meet its commitments to customers or increase its operating costs. Quality issues experienced by third-party providers can also adversely influence the quality and effectiveness of the company's products and services and result in liability and reputational damage.

OpportunitiesIncreased focus on energy sector Following the 2007-2008 financial crisis, GE has realigned its business strategy from being a major financial services conglomerate to industrial and manufacturing group.The company has now started to focus on energy sector to fuel its future growth. Currently, oil and gas sector is the biggest industrial growth platform for the company. Since 2007, GE has spent around $14 billion acquiring companies that provide equipment or services to the oil and gas industry.Within the energy sector GE is highly focused on the opportunities arising out of the recent development in the shale gas market. In this regard, in July 2013, GE acquired Lufkin Industries, a provider of artificial lift technologies for the oil and gas industry and a manufacturer of industrial gears, for approximately $3.3 billion. The move broadens GE Oil & Gas’ artificial lift capabilities with solutions for a wider variety of well types and technology for production automation and optimization in the drilling industry. Furthermore, according to various industry estimates, the global artificial lift sector is expected to reach $12.8 billion in 2013. The current growth is being fuelled by the development of unconventional shale plays and liquids-rich resource plays. For instance, in North America, an increased pursuit of oil has driven demand for the rod lift systems manufactured by Lufkin.Apart from the shale gas sector, the company is also focused on the growing LNG market. Across the globe, the demand for small-scale LNG production is growing as new discoveries of natural gas are making it cost-efficient to use cleaner burning natural gas. In line with its strategy, GE Oil & Gas acquired substantially all of the assets of the Salof Companies, a designer

and manufacturer of small-scale liquefied natural gas (LNG) technologies. Similarly, GE also acquired 50% stake in Beijing enCryo Engineering, a Beijing-based joint venture with Beijing Maison Engineering that specializes in engineering for all aspects of the oil and gas, chemical and petrochemical sector. Thus, increased focus on the energy sector, especially shale gas and LNG markets, would enable the company to generate sustainable business performance and further drive its earnings and profitability.

New contracts to enhance top line growthGE entered into several new contracts, and further strengthened the existing contacts in recentyears. For instance, in September 2013, GE Capital Aviation Services, the commercial aircraft leasing and financing arm of GE, and Boeing completed an order for 10 787-10 Dreamliners. Also, in the same month, GE Aviation announced a $2.5 billion contract with German airline Lufthansa. Furthermore, in June 2013, GE was awarded a contract with its consortium partner, Downer EDI, to supply 67 turbines, build and maintain the $350 million Boco Rock wind farm in New South Wales, Australia.Moreover, in May 2013, the company signed a multimillion dollar, multi-year maintenance plan with the UK-based energy company RWE npower to provide a full range of services for its Great Yarmouth and Little Barford power plants. In September 2012, GE Oil & Gas and Brazilian energy company, Petrobras, signed the subsea wellhead production contract, worth nearly $1.1 billion. This included the delivery of approximately 380 subsea wellhead systems and installation tools needed in oil well exploration. In the same month, Athabasca Oil awarded GE a contract to design and supply an integrated evaporator system for its 12,000 barrels per day Hangingstone oil sands operation located near Fort McMurray in northeastern Alberta, Canada. Similarly in August 2012, GE Energy Management's power conversion business received a contract from Singapore marine services company, Swire Pacific Offshore Operations (Pte) Limited, to supply integrated power generation, propulsion, dynamic positioning and automation systems for eight new offshore platform supply vessels.Thus, such new contracts help the company in generating incremental revenue growth and further enhance its overall business results. Moreover, these acquisitions are likely to add new customers and complement the existing product portfolio of the company.Expansion of mining business With focus on building new revenue stream and reducing its reliance on its huge financing arm, GE has decided to expand its mining business unit. The continuing urbanization and growth in energy demand in the emerging economies such as China and India augurs well for the long-term future of the global mining industry.In this regard, in September 2012, GE Transportation launched its newest business unit, GE Mining, headquartered in Brisbane, Australia. Furthermore, the company plans to double the size of its new mining business to $5 billion in revenue by 2016. Moreover, to aggressively position itself in the growing mining equipment market, the company acquired the assets of Fairchild International, which manufactures underground mining equipment. Additionally, in the mid of 2012, the company entered into an agreement to acquire Australia based Industrea, a provider of safety and productivity-enhancing mining equipment and services. Thus, these acquisitions could help GE reach a global customer base with enhanced products based on its propulsion systems, energy storage offering and system integration capabilities. In addition, these acquisitions also help GE to penetrate into many untapped markets and strengthen its position in the global mining sector.

Threats

Challenging macroeconomic and political environment in the US and Europe The challenging macroeconomic and political environment in the US and Europe could limit GE’s growth prospect in the short term. The company is heavily reliant on the US and Europe market which together contribute around 66% of its total revenue. Though the US economy is slowly recovering, largely driven by housing and consumer, the capital spending across various industries still remains sluggish. As a result, the US is currently experiencing its weakest recovery since the 1930s. Furthermore, the company is expected to face major political deadlock in 2013 ranging from the fiscal situation, repeated debt-limit controversy and tax reform. For instance, in October 2013, the US government went through partial shutdown in 17 years primarily due to Republicans' opposition to the healthcare reforms. This uncertainty could impact capital investment in the US which in turn may result in lower orders across GE’s industrial businesses. In addition, GE also faces major headwinds from the weak economic conditions in Europe which is expected to continue into 2013, especially in countries undergoing fiscal austerity programs. According to various industry reports, in the first quarter of 2013, the euro zone economy declined for six consecutive quarters. In addition, nine of the 17 countries were in recession which includes Spain, France, Italy, Finland, Netherlands, Portugal, Cyprus, Greece and Slovenia. The company has significant operation in the US and Europe. These regions accounted for more than 66% of GE's total revenues in FY2012. Hence, a challenging macroeconomic and political environment in the US and Europe could impact GE’s sales volume and overall business growth in the short term.

Environmental and other government regulationsGE’s operations, like other companies in the industry, face several environmental and other governmental regulations. It is subject to various federal, state, local and foreign environmental laws and regulations in all of the jurisdictions in which it operates. These laws and regulations cover the discharge, treatment, storage, disposal, investigation and remediation of some materials, substances and wastes. GE is involved in environmental investigations or remediation at some of its current and former facilities, and at third-party sites. The company incurred expenditure for site remediation actions of $400 million in FY2012, FY$300 million in FY2011 and $200 million in FY2010. Further, it expects that such remediation actions will require average annual expenditures in the range of about $400 million over the next two years.In addition, GE's businesses are subject to various US federal, state and foreign laws, regulationsand policies. These regulations and policies may force the company to modify its business models and objectives or affect its returns on investment by making existing practices more restricted. For instance, the US and non-US governments are undertaking a substantial revision of the regulation and supervision of bank and non-bank financial institutions, consumer lending, the over-the-counter derivatives market and tax laws and regulations, which changes may have an effect on GE's and GE Capital's structure, operations, liquidity, effective tax rate and performance. The company is subject to regulatory risks from laws that reduce the allowable lending rate or limit consumer borrowing, local capital requirements that may increase the risk of not being able to retrieve assets, and changes to tax law that may affect return on investments. Additionally, GE is also subject to a number of trade control laws and regulations that may impact its ability to sell products in global markets. Thus, compliance cost associated with such stringent environmental and other government regulations could increase GE’s operating expenditure, which in turn may have material adverse impact on the company's cash flows, competitive position, and financial condition.

Aggressive competitionGE faces significant threat from the aggressive competition across it businesses globally. For instance, the businesses in which General Electric Capital engages are subject to competition from various types of financial institutions, including commercial banks, thrifts, investment banks, broker-dealers, credit unions, leasing companies, and consumer loan companies, among others. Similarly, worldwide competition for power generation products and services is intense characterized by various regional and multinational companies. The company competes with a number of US and international companies, including 3M, Hitachi, Honeywell International, Mitsubishi Corporation, Siemens, Textron, and United Technologies, among others. Thus, operating in intense competitive environment could result in pricing pressure risks which in turn may adversely impact GE’s margins and profitability.

FINANCIAL PROFILE3-5 Yr. EPS Gr. Rate 10%

52-Wk Range$25.75-$19.87

Shares Outstanding 10,183.8MFloat 12,169.0MMarket Capitalization 273.47BAvg. Daily Trading Volume 3,42,44,028Dividend/Div Yield $0.76/2.97%Book Value $12.00Fiscal Year Ends Dec2013E ROE 13.60%LT Debt $12,600.0MCommon Equity $122,700MCash flow per share (Estimate) $2.6Price to earnings ratio 20.32Dividend yield 0.76 (2.80%)Net Profit (Estimate) 16750M

EPS Diluted Q1 Q2 Q3 Q4 Year Mult.2011A 0.33 0.34 0.31 0.39 1.37 18.6x2012A 0.34 0.38 0.36 0.44 1.52 16.8x2013E 0.39A 0.36A 0.36A 0.53 1.64 15.6x

SUMMARYOrders growth of 19%, including equipment orders up 32% (1.2 b:b) and services up 5%, and positive mix and cost reductions driving solid industrial segment OM expansion of 120 bps, depicted underlying resilient fundamentals. Mix was a solid benefit at Power & Water (distributed power up 44%, Wind down 42%), Aviation (services up 14%, outpacing 10%

equipment growth), and Transportation. At Oil & Gas, the Lufkin acquisition and mix (lower measurement and controls growth) drove OM down 90 bps y-o-y, while Energy Management continues to struggle to attain meaningful profitability. Within O&G, M&C tends to drive very high incremental margins, so a return of growth could be a key 2014 driver.

Five year weekly chart of GE with relevant up and down trend lines:

LONG TERM UP TREND LINE

Short Term Trend Lines

Intermediate Term Trend Line

One year daily chart of GE with a 14 day RSI along the bottom with all overbought sell signals and oversold buy signals and marked divergences between price and RSI:

One year chart of GE with a slow stochastic indicator with relevant buy and sell signals:

One year daily chart of GE with a short and longer term moving average with buy and sell signals indicated based on a two moving average crossover system:

FUNDAMENTAL ANALYSIS OF GE

General Electric is on pace to post earnings of about $1.65 this year, a 9% year-over-year rise. The company continues to get back to its industrial roots, and though subscribers will note that revenues are set to decline, management is doing more with less. The unwinding of GE Capital remains a priority, and a bevy of acquisitions on the commercial side should prop up the top line over time. I anticipate greater cost savings in 2014. A total of $2 billion was set to be trimmed from the books next year, and I think the company’s scale and global reach should lead to even bigger savings when all is said and done. New CFO Jeff Bornstein has a mandate to drive higher cost-outs, and hence this equity got a bounce in price after the third-quarter report. If so, upside potential to our 2014 EPS call of $1.80 will immediately arise. I am inclined to believe the investment community is looking for more good news to drive these shares higher after management disclosed that the share count will be brought down some, acquisitions will be reined in, and more operating cash will be returned to shareholders. Exiting the credit card game was a major step for this industrial behemoth.GE Capital has taken the brunt of the criticism aimed at this company for years now. Selling or spinning off its private-label credit cards should be a win/win for all parties. These assets are undervalued in the GE portfolio and should be enticing to a number of bidders. Also, their divestiture takes a good portion of the risk out of the GE story. Bears are already grumbling about dilution, but we think that attitude is too near-sighted. I think General Electric’s timely stock is a fine addition to a number of portfolios. The blue chip offers above average appreciation potential 3 to 5 years hence and a dividend higher than the Industry median.

3Q beats recently cut consensus among analysts. EPS of $0.36 was a penny ahead of Street/JPM estimates, in line with where the Street stood earlier this quarter. Industrial segment profits beat modestly as Distributed Power upside offset weakness at Oil & Gas, while a lower-than-expected GECS tax rate helped slightly. Keep in mind, however, that results were merely in line with where consensus stood in early September, a dynamic that could be equated to beating a negative pre-announcement. This is quite similar to what happened in 2Q.

3Q13 Segment Review

Power & WaterSales decreased 10% y-o-y to $6.5B with equipment revenues down 13% (Thermal -12%, Wind -42%, Distributed Power +44%), while service revenues were down 5%. Overall orders ncreased 19% y-o-y (Europe up 9%) to $5.9B, with equipment orders up 37% (driven by Wind and Distributed Power) and service orders up 4% (up 7% ex-Europe). Segment profit of $1.3B increased 9% y-o-y on value gap, cost out and DP growth. Pricing was down 0.8%, with equipment down 2.9%, partially offset by services up 1.4%.

Oil & GasRevenues increased 18% (about half core, half organic) to $4.3B, on equipment up 19% y-o-y (subsea +23%, drilling & surface +17%) while service revenue was up 18%. Orders of $4.4B were up 4%, with equipment orders up 3% on growth in turbomachinery (+17%) partially offset

by subsea (-41%). Service orders were up 6%. Segment profit of $519M increased 11% y-o-y, as acquisitions, lower measurement & control growth, and project delays drove 90 basis points of margin contraction. Pricing was down 0.2% against a positive 1.7% comparison.

AviationRevenues increased 12% (11% core) y-o-y to $5.4B, with equipment revenue up 10% driven by higher engine shipments, and service revenue up 14%. Overall backlog increased to $114B (+4% sequentially). Commercial engine orders increased 4x y-o-y to $3.8B, while military equipment orders were down 30% y-o-y. Service orders increased 9% y-o-y to $2.7B (commercial +15%, 3Q spares ADOR +9%). GE shipped 559 commercial engines in 3Q13, up 8%. Segment profit increased 18% y-o-y to $1.09B driven by strong volume and value gap.

HealthcareRevenues were about flat y-o-y at $4.3B, below our +4% estimate. Geographically, revenues in growth markets were up 5%, US +2%, Europe up 2% and Japan down 27%. Orders of $4.7B were up 2%, with equipment orders up 6% (US up 8% and Europe flat) and service orders down 4%. Profits increased 7% to $665M, as restructuring benefits more than offset negative pricing.

TransportationRevenues were flat y-o-y at $1.4B, below our up 6% estimate, as growth in services (+17%) offset lower equipment revenues (-14%, locomotives shipments flat y-o-y). Orders of $1.6B were up 34%. Equipment orders were up 65%, driven by a large NA locomotive order for 275 units, while service orders were up 8%. Segment profit increased 15% y-o-y to $306M in the quarter, driven by positive value gap and services growth, which also drove margins up 300 basis points.

Energy ManagementRevenues decreased 3% y-o-y to $1.8B, below our +6%/$2.0B estimate, driven by lower revenues in digital energy (-27%). Orders of $2.0B were up 16% y-o-y, with digital energy up 23%, power conversion up 19%, and intelligent platforms up 16%. Segment profit decreased to $18M in the quarter (vs. $42M in 3Q12), driven by negative volume leverage partially offset by positive value gap, as segment margins were down 120 basis points.

Home & Business SolutionsHome & Business Solutions revenues grew 7% y-o-y to $2.1B, above our +5% estimate. Appliances revenue was up 11%, partially offset by lighting revenue, down 1%. 3Q housing starts were up 19%, boosted by single-family up 16% and multifamily up 27%. Segment profit was up 28% y-o-y to $77M, and margins were up 60 bps y-o-y.

TECHNICAL ANALYSIS OF GE

An up price channel can be seen developing since February 2013, the stock has crossed both the

50 week Moving Average and the Ichomoku Cloud in December of last year with increasing

volume. The Current RSI Indicator is above 70 and at 75.93 which indicates that the Stock is in

an overbought state right now.

Currently the stock price is above the Ichomoku cloud showing also that the stock is in a Bullish

or a Very Bullish trend. If you look at the Moving Average Convergence Divergence Analysis of

the stock, there is a Centerline Crossover Signal with a Positive MACD which indicates that the

12-week EMA is above the 26-week EMA. Positive values increase as the shorter EMA diverges

further from the longer EMA. This means upside momentum is increasing. We can also see that

in the middle of October, there has been a Signal line Crossover by the MACD which also

indicates a bull trend.

For the Long Run into March 2014, The Long Term Trend line along with the 50 week Moving

Average will act as major support.

PRICE OBJECTIVE

Short Term: Bearish – Due to the RSI,MACD analysis,there is a short term bearish reversal

trend expected to pull the stock to about $26.5.Risk Level of losing $2 - $3 in the short term.

Intermediate :Bullish - My Price Objective for the stock keeping in mind the time frame of

December 31st 2013 to March 31st 2014 in mind would be a maximum of $34 and a minimum

of $28.5 based on the Trenline analysis,Ichomoku clouds,RSI Indicators,MACD, Candlestick

pattern and Continuation Chart Pattern(Up Price Channel) analysis.

Long Term Analysis: Bullish the stock will move to a range between $37 to $42 in a 3-5 year

period.

MARKET OUTLOOK

With the Ongoing QE3 pushing the S&P to hit all-time highs at a record rate surpassing all

analyst expectations.I expect a short term correction coming soon. But the market is heavily

driven by the Federal Reserve policy on Bond Buying and is being closely monitored by traders

all over the world.Hence,any pull back in the QE program or “Taper” in the bond buying

program announced in December 2013 or February 2014 of next year is going to cause the major

correction to pull the bulls back with the bears being set into motion.

Price Objective : Maximum of : $1850 and Minimum of $ 1700 (200 day MA acting as support)

ADVANCE DECLINE LINE:

The Advance Decline Line (AD Line) is a breadth indicator based on Net Advances, which is the number of advancing stocks less the number of declining stocks. Net Advances is positive when advances exceed declines and negative when declines exceed advances. The AD Line is a cumulative measure of Net Advances. It rises when Net Advances is positive and falls when Net

Advances is negative. The AD Line should confirm an advance or a decline with similar movements. Bullish or bearish divergences in the AD Line signal a change in participation that could foreshadow a reversal.

GE has larger percentage price swings than the market as a whole with a beta of 1.28 (risk level). This suggests that if the market rises, GE will increase more, and if the market declines, GE will decline more. This is clearly illustrated in the chart below.

Figure: NYSE Advanced-Decline Line

The above figure shows a bearish divergence in the NYSE AD Line from November 2013. The AD Line peaked in October 2013, but the NY Composite moved to new highs in October. The lower high in the AD Line in September 2013 set up the first bearish divergence. After a pullback into August, the NY Composite surged again to a new high in October. However, the AD Line fell well short of its October high and started forming a larger bearish divergence .This bearish divergence foreshadows a soon to be coming short term bear market in the coming months.

Bibliography:

1. Wikipedia

2. Investopedia

3. Yahoo Finance

4. Bigcharts.com

5. Stockcharts.com

6. Mergent Online

7. JP Morgan Research

8. Oppenheimer Research

9. Valueline Report