General Electric (GE)

GE CEO Jeff Immelt presented at the Electrical Products Group conference yesterday. Main takeaways were generally positive, here is a brief summary:

• GE Capital divestments are proceeding faster than expected, and are now looking for a total of $100bn in asset sales by the end of this year, compared to $90bn previously expected.
• Environment generally positive overall, US growing slowly, Europe slightly better, China “OK.” Oil and Gas earnings 0 to -5% this year. Any recovery in US energy would be very positive for GE. Forex manageable.
• GE originally estimated $1.2bn in total synergy from the pending Alstom deal, but now will capture closer to $3bn by 2018 in synergy. GE remains confident regulators will approve the deal.
• New LEAP turbine engine has a $26bn backlog, and is performing very well. New products expected to drive equipment margins above current 5% level.

One area that is overlooked by analysts, but Immelt spoke very strongly about and we are very high on is GE’s Predix software. GE will be offering Predix to customers and non-customers, and using it in their own manufacturing facilities. The “Internet of Things” predictive analytics package drives increases in productivity. GE sees this generating $8bn in revenue by 2017, and the sky is the limit in this space. Per Immelt:

“Mark my words, the ability to combine knowledge of the assets’ physics and analytics is a killer competitive advantage.”

GE’s restructuring should continue to unlock shareholder value, especially when combined with product development, M&A synergies, and the industrial analytics packages revolution.

 

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