General Electric Company (NYSE:GE) currently seems to be a smart choice for investors seeking exposure in the multi-sector space. Solid fundamentals and positive revision in earnings estimates are reflective of healthy growth potential of the stock.
This Boston, MA-based company currently sports a Zacks Rank #1 (Strong Buy). It belongs to the Zacks Diversified Operations industry, currently placed in the top 29% (with Zacks Industry Rank #73) of more than 250 Zacks industries. Notably, the top 50% of the Zacks-ranked industries tend to outperform the bottom 50% by a factor of more than 2 to 1.
You can see the complete list of today’s Zacks #1 Rank stocks here.
We believe that improving operations in the oil and gas industry, rising global demand for air travel, demand from defense and governmental fronts, technological upgrade in manufacturing processes, and infrastructure development are aiding multi-sector companies.
Below we discussed why investing in General Electric will be a smart choice.
Share Price Performance, Impressive Earnings Outlook: Market sentiments seem to be working in favor of General Electric over time. Year to date, its share price has gained 37.4% compared with the industry’s growth of 22.2%.
It is worth mentioning here that the company’s shares have gained 2.3% since the release of first-quarter 2019 results on Apr 30, 2019. Its quarterly earnings of 14 cents per share surpassed the Zacks Consensus Estimate of 9 cents by 55.56%. Average earnings surprise for the last four quarters was 5.56%.
The company anticipates gaining from the launch of the digital business, commercial expansion in emerging markets, debt-reduction initiatives and lowering exposure to the GE Capital business in the quarters ahead. For 2019, its adjusted earnings are predicted to be 50-60 cents per share.
In the past 60 days, earnings estimates for 2019 and 2020 have been revised upward, reflecting positive sentiments about the company’s growth prospects. Currently, the Zacks Consensus Estimate for earnings for General Electric is pegged at 61 cents for 2019 and 72 cents for 2020, suggesting growth of 5.2% and 2.9% from the respective 60-day-ago figures.
General Electric Company Price and Consensus
General Electric Company price-consensus-chart | General Electric Company Quote
Portfolio Restructuring A Boon: In June 2018, the company rolled out its business restructuring plan that will enable it to become a high-tech industrial company. It noted that its core business segments in the future will be Aviation, Power and Renewable Energy. It will gradually exit from all other businesses.
Effective from the first quarter of 2019, the company restructured businesses within its Power segment to include Gas Power and Power Portfolio. While Gas Power includes General Electric’s gas lifecycle business, Power Portfolio comprises its Grid, Nuclear, Steam and Power Conversion businesses.
The company sold GE Transportation to Wabtec Corporation (NYSE:WAB) in the first quarter. Also, an agreement was signed to divest the BioPharma business to Danaher Corporation (NYSE:DHR) , likely to close in the fourth quarter of 2019.
Further, General Electric is working on disposing of its stake in Baker Hughes, a GE company (NYSE:GE) , and gradually exit its oil and gas business. Additionally, initiatives are being taken to reduce exposure in the GE Capital business.
Healthy Organic Growth Opportunities: In the first quarter of 2019, the company’s Industrial organic revenues increased 5% year over year. Among Industrial’s component businesses, Oil & Gas organic sales rose 8% year over year, Aviation sales expanded 12%, Renewable Energy grew 3%, and Healthcare gained 4%.
For 2019, General Electric anticipates Industrial organic sales to increase in a low to mid-single digit. Of this, strengthening services and military businesses are likely to support high-single-digit growth in Aviation organic sales. Renewable Energy’s organic revenues are likely to grow in double digits while Healthcare's organic revenues are predicted to increase in a mid-single digit.
Debt Reduction: The company is working diligently to reduce leverage. In the first quarter of 2019, the company lowered debt (external) by $2 billion. It predicts total debts to be $62-$64 billion in 2019, down from $66 billion in 2018, while its liquidity is anticipated to improve to roughly $20 billion versus $15 billion recorded in 2018.
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Westinghouse Air Brake Technologies Corporation (WAB): Free Stock Analysis Report
Danaher Corporation (DHR): Free Stock Analysis Report
General Electric Company (GE): Free Stock Analysis Report
Baker Hughes, a GE company (BHGE): Free Stock Analysis Report
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Zacks Investment Research