Gazprom set to topple GE as world’s fourth-largest company on gas rally
Russia’s OAO Gazprom is poised to unseat General Electric as the world’s fourth-largest company by market value after energy prices rose to records and GE’s first earnings decline in five years erased $50 billion from its stock.
By Agencies |
NEW YORK: Russia���s OAO Gazprom is poised to unseat General Electric as the world���s fourth-largest company by market value after energy prices rose to records and GE���s first earnings decline in five years erased $50 billion from its stock.
Gazprom, the world���s biggest natural gas producer, increased 21% on Moscow���s Micex Exchange to $318.8 billion in the past year as the fuel rallied 43%. GE dropped 11% to $322.7 billion on the New York Stock Exchange. The world���s largest maker of locomotives and jet engines retreated the most in 20 years on April 11 as earnings fell on credit losses in its financial services units, which accounted for more than half of GE���s profit in 2007.
���There has been a growing question mark around GE with so much leverage to finance,��� said Bruce McCain, the Cleveland-based head of investment strategy at Key Private Bank, which manages $40 billion. ���You were paying an industrial multiple for a company that was 50% financial. The credit crisis underscores that a financial company is more risky.���
Gazprom, established in Moscow 15 years ago from the Soviet Gas Industry Ministry, and GE, which Thomas Edison helped create in 1892, are converging as the US economy slows and Russia grows at its highest annual rate this decade.
GE stunned investors on April 11 when chief executive officer Jeffrey Immelt said 2008 earnings will fall short of his previous forecast and first-quarter profit dropped at four of its six biggest units.
Immelt, who reiterated the 2008 forecast on March 13 after saying it was ���in the bag��� in December, blamed the results on weakening credit markets. The collapse of the subprime mortgages last year and the ensuing credit contraction saddled the world���s largest financial institutions with $290 billion of writedowns and losses.
���The capital markets are a little better��� than they were at the end of March, when turmoil prompted by the near-collapse of Bear Stearns made it difficult for GE to complete deals, Immelt said at the company���s annual meeting.
GE���s inability to close some financial asset sales at the end of the first quarter contributed to its unexpected drop in profit, which triggered the sharpest sell-off in its shares in two decades. Some of these deals have now been completed, Immelt said.
Analysts at Goldman Sachs, Credit Suisse, Deutsche Bank and Citigroup cut their ratings on the shares.
Gains in oil and natural gas have helped boost the stock. Crude rose to a record $119.90 a barrel in New York Tuesday, boosted by demand from countries expanding faster than the US. Russia���s 9.5% annual economic growth trails only China���s 10.6% rate of increase among the 15 largest economies, according to data compiled by agencies. The US economy is growing at a 2.5% yearly pace.
Gazprom, the world���s biggest natural gas producer, increased 21% on Moscow���s Micex Exchange to $318.8 billion in the past year as the fuel rallied 43%. GE dropped 11% to $322.7 billion on the New York Stock Exchange. The world���s largest maker of locomotives and jet engines retreated the most in 20 years on April 11 as earnings fell on credit losses in its financial services units, which accounted for more than half of GE���s profit in 2007.
���There has been a growing question mark around GE with so much leverage to finance,��� said Bruce McCain, the Cleveland-based head of investment strategy at Key Private Bank, which manages $40 billion. ���You were paying an industrial multiple for a company that was 50% financial. The credit crisis underscores that a financial company is more risky.���
Gazprom, established in Moscow 15 years ago from the Soviet Gas Industry Ministry, and GE, which Thomas Edison helped create in 1892, are converging as the US economy slows and Russia grows at its highest annual rate this decade.
GE stunned investors on April 11 when chief executive officer Jeffrey Immelt said 2008 earnings will fall short of his previous forecast and first-quarter profit dropped at four of its six biggest units.
Immelt, who reiterated the 2008 forecast on March 13 after saying it was ���in the bag��� in December, blamed the results on weakening credit markets. The collapse of the subprime mortgages last year and the ensuing credit contraction saddled the world���s largest financial institutions with $290 billion of writedowns and losses.
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Meanwhile, Immelt said on Wednesday US capital markets have improved since the end of the first quarter but the overall US economic picture is unchanged, and the company has raised its 2008 cost-cutting goal by $1 billion.���The capital markets are a little better��� than they were at the end of March, when turmoil prompted by the near-collapse of Bear Stearns made it difficult for GE to complete deals, Immelt said at the company���s annual meeting.
GE���s inability to close some financial asset sales at the end of the first quarter contributed to its unexpected drop in profit, which triggered the sharpest sell-off in its shares in two decades. Some of these deals have now been completed, Immelt said.
Analysts at Goldman Sachs, Credit Suisse, Deutsche Bank and Citigroup cut their ratings on the shares.
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Gazprom, the state-run supplier of a quarter of Europe���s natural gas, reported third-quarter profit of 113.1 billion rubles ($4.6 billion) in February, beating by 18% the median estimate of analysts surveyed. Gains in oil and natural gas have helped boost the stock. Crude rose to a record $119.90 a barrel in New York Tuesday, boosted by demand from countries expanding faster than the US. Russia���s 9.5% annual economic growth trails only China���s 10.6% rate of increase among the 15 largest economies, according to data compiled by agencies. The US economy is growing at a 2.5% yearly pace.
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GE, the second-biggest US company by market value, has raised its 2008 cost-cutting goal to $3 billion from $2 billion, Immelt said. Last year the company cut costs by $2 billion.Download
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