GE, McDonald's deliver for shareholders
Both stocks have room to run.
General Electric (GE) and McDonald's (MCD) have bolstered my faith in the economic recovery.
GE on Friday reported better-than-expected first-quarter results as the company's energy business outperformed the finance division for the first time since 2010. Meanwhile, the Golden Arches met Wall Street's lofty expectations, reporting a 7.3% rise in sales at stores open at least 13 months as the public gobbled up menu items such as the new Chicken McBites.
Shares of General Electric, which have gained about 7% this year, and of McDonald's, which have slipped more than 5%, were up in early trading. There were positives in both earnings reports for investors to like.
Both shares are worth adding to most portfolios. Wall Street expects GE shares to hit $22.29 during the next 52 weeks, about 16% higher from where it recently traded. Analysts expect McDonald's shares to hit $106.92, about 10% above where it currently trades, during the same time.
Earnings from continuing operations at GE rose 1% to $3.59 billion, or 34 cents a share, versus to $3.56 billion, or 33 cents a year earlier. Revenue fell 8% to $35.2 billion in part because of the sale of NBCUniversal. Wall Street expected earnings of 33 cents on revenue of $34.7 billion, according to Bloomberg.
Among the highlights were the 20% rise in infrastructure orders to $23.1 billion, a record high, and the improvements at GE Capital, which gained 27% in the first quarter excluding the Garanti sale impact.
McDonald's reported that net income rose 4.8% to $1.27 billion, or $1.23 a share. Revenue increased 7.1% to $6.55 billion, fueled by gains around the world. Wall Street expected the fast-food chain to earn $1.23 per share on revenue of $6.54 billion, according to Bloomberg News.
Investors seem confident that Don Thompson will continue in the footsteps on Jim Skinner when he retires as the CEO in July. McDonald's plans to spend about $1.45 billion to remodel about 2,400 stores this year.
General Electric's performance underscores the fact that businesses are feeling confident about the future. McDonald's results prove that consumers are willing to buy premium products such as coffee drinks.
The economy still isn't firing on all cylinders. But many people believe the tide is turning, and GE and McDonald's are benefiting from the rising optimism.
Jonathan Berr is long McDonald's.
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