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GE Remains Poised for Long-Term Growth with Digital Focus
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On Jun 22, Zacks Investment Research updated the research report on industrial goods manufacturer General Electric Company (GE - Free Report) .
General Electric is actively engaged in massive restructuring initiatives to create a simpler and nimbler firm. From a classic conglomerate with diversified business interests in financial services, media, industrial and technology-based operations, the company is pruning its operating portfolio to focus on core manufacturing businesses with a digital edge.
GE Appliance Divestiture
The company has completed the divesture of GE Appliance to the Chinese multinational consumer electronics manufacturer, Haier Group. GE Appliance manufactures and services major home appliances including refrigerators, freezers, electric and gas ranges, cook tops, dishwashers, clothes washers and dryers, microwave ovens, room air conditioners, and residential water systems under the GE Monogram, GE Cafe and Hotpoint brands. The segment also includes a much smaller lighting business that is not being considered for sale.
The business is exclusively focused on the U.S. markets and thereby lacks the global scale to compete with other leading electronics manufacturers like Samsung Electronics Co. Ltd. and LG Electronics Inc., leading to flatter revenues and shrinking margins. Consequently, the divestiture is likely to unlock additional value by allocating more resources to higher-growth businesses. (Read More: GE Completes Divestiture of Appliance Business to Haier).
Digital Focus in Europe
In order to augment its revenues, General Electric has initiated steps to supplement its digital presence in Europe and foster growth of the industrial ecosystem for the continent’s overall development. The strategic move is largely fuelled by the market predictions that digitization of products and services is likely to yield an excess of 110 million Euros in annual revenues in Europe over the next five years.
In order to tap the local talent and nurture technological innovation, General Electric opened a new digital office in Paris – Digital Foundry, which is likely to be the hotbed for the industrial ecosystem. The Digital Foundry is the first of the four digital offices that are set to be opened this year, to form a global network of centers through which GE Digital intends to incubate local startups, form client collaborations to develop new applications and extend the burgeoning community of industrial developers in Europe. (Read More: GE Expands Industrial Internet for Digital Growth in Europe).
Investments in Saudi Arabia
General Electric has also inked a memorandum of understanding with the Saudi Arabian Industrial Investments Company to invest $3 billion in the country’s digital and industrial sectors to diversify its crude oil-based economy. This will enable the company to expand its presence in Saudi Arabia as well as play an integral part in transforming the regional dynamics.
In particular, General Electric plans to invest in projects related to water, energy, aviation, digital and other non-oil industries to help the country shed its dependency on crude oil production for economic development. The company further intends to double its workforce in the country to 4,000 by 2020. (Read More: GE to Invest $3B in Saudi Arabia to Diversify Economy).
Moving Forward
Although General Electric is taking prudent steps to limit its financial exposure by divesting GE Capital assets, it is still susceptible to various market risks. The company’s objectives of simplification and productivity improvement pose operational execution risks as well. For a company as large as General Electric, the additional revenues needed for growth are quite large, posing a challenge in developing businesses on such a vast scale.
Nevertheless, we remain encouraged with the healthy growth potential of this Zacks Rank #4 (Sell) stock. Stocks that look promising in the same industry include China Merchants Holdings (International) Company Limited (CMHHY - Free Report) , Tutor Perini Corporation (TPC - Free Report) and Dycom Industries Inc. (DY - Free Report) . While China Merchants Holdings holds a Zacks Rank #2 (Buy), Tutor Perini and Dycom sport a Zacks Rank #1 (Strong Buy).
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GE Remains Poised for Long-Term Growth with Digital Focus
On Jun 22, Zacks Investment Research updated the research report on industrial goods manufacturer General Electric Company (GE - Free Report) .
General Electric is actively engaged in massive restructuring initiatives to create a simpler and nimbler firm. From a classic conglomerate with diversified business interests in financial services, media, industrial and technology-based operations, the company is pruning its operating portfolio to focus on core manufacturing businesses with a digital edge.
GE Appliance Divestiture
The company has completed the divesture of GE Appliance to the Chinese multinational consumer electronics manufacturer, Haier Group. GE Appliance manufactures and services major home appliances including refrigerators, freezers, electric and gas ranges, cook tops, dishwashers, clothes washers and dryers, microwave ovens, room air conditioners, and residential water systems under the GE Monogram, GE Cafe and Hotpoint brands. The segment also includes a much smaller lighting business that is not being considered for sale.
The business is exclusively focused on the U.S. markets and thereby lacks the global scale to compete with other leading electronics manufacturers like Samsung Electronics Co. Ltd. and LG Electronics Inc., leading to flatter revenues and shrinking margins. Consequently, the divestiture is likely to unlock additional value by allocating more resources to higher-growth businesses. (Read More: GE Completes Divestiture of Appliance Business to Haier).
Digital Focus in Europe
In order to augment its revenues, General Electric has initiated steps to supplement its digital presence in Europe and foster growth of the industrial ecosystem for the continent’s overall development. The strategic move is largely fuelled by the market predictions that digitization of products and services is likely to yield an excess of 110 million Euros in annual revenues in Europe over the next five years.
In order to tap the local talent and nurture technological innovation, General Electric opened a new digital office in Paris – Digital Foundry, which is likely to be the hotbed for the industrial ecosystem. The Digital Foundry is the first of the four digital offices that are set to be opened this year, to form a global network of centers through which GE Digital intends to incubate local startups, form client collaborations to develop new applications and extend the burgeoning community of industrial developers in Europe. (Read More: GE Expands Industrial Internet for Digital Growth in Europe).
Investments in Saudi Arabia
General Electric has also inked a memorandum of understanding with the Saudi Arabian Industrial Investments Company to invest $3 billion in the country’s digital and industrial sectors to diversify its crude oil-based economy. This will enable the company to expand its presence in Saudi Arabia as well as play an integral part in transforming the regional dynamics.
In particular, General Electric plans to invest in projects related to water, energy, aviation, digital and other non-oil industries to help the country shed its dependency on crude oil production for economic development. The company further intends to double its workforce in the country to 4,000 by 2020. (Read More: GE to Invest $3B in Saudi Arabia to Diversify Economy).
Moving Forward
Although General Electric is taking prudent steps to limit its financial exposure by divesting GE Capital assets, it is still susceptible to various market risks. The company’s objectives of simplification and productivity improvement pose operational execution risks as well. For a company as large as General Electric, the additional revenues needed for growth are quite large, posing a challenge in developing businesses on such a vast scale.
Nevertheless, we remain encouraged with the healthy growth potential of this Zacks Rank #4 (Sell) stock. Stocks that look promising in the same industry include China Merchants Holdings (International) Company Limited (CMHHY - Free Report) , Tutor Perini Corporation (TPC - Free Report) and Dycom Industries Inc. (DY - Free Report) . While China Merchants Holdings holds a Zacks Rank #2 (Buy), Tutor Perini and Dycom sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>