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After Striking a Deal, What’s an Investor to Think of General Electric Company (GE) and Comcast Corporation (CMCSA)?

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On Wednesday, Feb. 13, investors in General Electric Company (NYSE:GE) found their company with $16.7 billion in new cash, after GE decided to sell Comcast Corporation (NASDAQ:CMCSA) the remaining portion of NBC Universal that the cable giant did not already own.  The market reacted positively toward both stocks, as GE and Comcast finished the trading day up 3.5% and 3%, respectively.  All eyes are now on the motivations behind the transaction, and where the two companies go from here.

A Simpler, Better GE

General Electric Company (GE)GE is a $244 billion diversified industrial conglomerate, and a Dow Jones Industrial Average component. Recently, GE released fourth-quarter and full-year 2012 results. The company reported total revenues that were essentially flat for the year, and a 12% increase in diluted earnings per share from continuing operations. GE reported diluted earnings per share of $1.39.

Selling the rest of NBC Universal will allow GE to achieve its long-held goal of buying back the shares it issued in the depths of the financial crisis.  The company expects to return $18 billion to investors as a result of the deal.  Furthermore, GE will now be able to return focus to its industrial business.

GE has tried very hard to restore its reputation as a company determined to provide shareholder returns.  After slashing its dividend in 2009 during the depths of the Great Recession, the company has increased its payout several times since then, to its current level of $0.19 per share.  Although the dividend isn’t where it was before it was cut, the trend is going in the right direction, and the stock currently yields a very respectable 3.25% at recent prices.

Comcast Flexes its Media Muscles

On the same day of the announcement, Comcast revealed results for NBC Universal, and the numbers were largely positive.  Revenues from NBC Universal’s cable networks, such as the Golf Channel, E! and Bravo, rose 3.3% to $8.77 billion last year.  Cable networks have become the main growth driver in the last few years for the industry.  Furthermore, Comcast said NBC Universal’s total revenue last year rose 13% to $23.81 billion. Its broadcast TV network, NBC, which had previously been struggling and losing ground to peer networks, saw the biggest revenue growth, gaining 27.4%.

Like GE, Comcast reported solid fourth-quarter and full-year results. The company’s adjusted earnings per share, excluding one-time items, increased 22% to $1.52 on the back of a 12% increase in consolidated revenues. Furthermore, Comcast increased its dividend 20% to an annualized $0.78 per share. In addition, the company also announced that it plans to repurchase $2.0 billion of its stock during 2013.

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