General Electric (GE) is active in a wide variety of market sectors, focusing on energy, technology infrastructure, capital finance, and consumer and industrial products. The company is paving a solid way to the future with its advancing technologies, and with its footprint extending almost over the entire globe, I believe GE will trade higher by 2013. Here is what I found.
GE is very active in and dependent upon the euro zone, where it goes head to head with Siemens (SI). Siemens is currently trading around its 52 week low, while GE is trading around its 52 week high. Analysts do not believe this discrepancy to last, as GE prices are expected to decline in coming weeks, mainly because of its work in finance and the European debt crash. GE is currently looking at 50% more revenue than Siemens, but it has 18% more debt.
This is all relative, as General Electric is still a monster powerhouse in the global economy. The company is trading at around 14 times earnings (Siemens is trading around 10 times earnings). Between the two, GE is more likely to see some drops in prices due to a higher valuation and more highly leveraged balance sheet. Even with drops, however, GE is still an industry giant with fantastic potential due to its dividend, upcoming projects, and overall financial numbers.
Despite production in various sectors of the market, General Electric had a respectable return on equity last year at 10.6%. Analysts estimate that in 2012 General Electric will have an EPS of $1.82 a share. With a multiple of 17, General Electric's value is closer to around $31 a share (up 55% from its current market value of about $20).
Competitor 3M (MMM) is also a dividend giant. The current yield is $0.59/$2.65. 3M's international expansion is rivaling that of General Electric's. While 3M is looking to break into China, General Electric is currently introducing innovating technology to India.
The company is introducing a technology to India called zero liquid discharge. This highly innovative concept eliminates liquid waste streams from plants and produces higher purity water for reuse. With zero liquid discharge, water consumption can be reduced by up to 90%. This is one of the many efficient and environmentally conscious paths that General Electric is heading down. After hopefully successful implementation in India, it would be incredible if the company could extend the reach of this project to other countries with low water quality.
The company is also setting up operations in Brazil and Kenya (Brazil is a market that is currently poised to have significant and substantial economic growth in the future). In those countries, as well as China and India, General Electric has local indigenous artists to have accurate translations and illustrations of its products for each of the country's inhabitants. This "GE Works" campaign is aiming towards demonstrating the company's influence in each of these countries and to act as a more "local" entity instead of a global powerhouse. General Electric wants to reach out to the inhabitants and make sure that its country is getting the best quality service and operations it can. While by doing this the company is expanding the breadth of its international assets, it is also assisting all kinds of development in countries that would not otherwise receive such help.
It is pretty much a necessity for companies like GE and 3M to extend its reach into international markets right now. This global expansion is looking to give 3M a 4% increase in sales. GE, meanwhile, is continuing to be a "dividend giant" due to its 3.49% yield. The annualized dividend is $0.68/share (paid in quarterly installments), and this payout makes General Electric sufficiently above average in comparison to other companies in a similar market. Competitor Hewlett-Packard (HPQ) has been hovering around its 52 market week low, but despite this it has very attractive P/E ratios. The company's dividend of $0.13/$2.64 is lower than GE's. Examining a company's past and present dividend yield is a great source to use in indicating where the company's finances are going. If that notion holds true, General Electric has consistently substantial dividend yields and is looking good for the future.
Another one of GE's competitors, the Carlisle Companies (CSL) is looking to have an increase in its dividend yield from this time last year. The company's current dividend is $0.18/$1.33, and analysts only expect this to go up. Raven Industries (RAVN) is a fantastic smaller technology company with a dividend yield of $0.21/$1.16. It has a return on equity that is 30.72%. Its ROE is a great indicator of potential profitability. Along with GE, these companies are all poised for growth in a dynamic industry that make take some hits but shows no signs of slowing down.
With the macroeconomic portrait of the U.S. economy weak and all the financial instability in Europe, it is not news that the world markets are suffering right now. Despite this, General Electric has consistently been recommended by analysts to buy. The company's engineering capabilities have the potential to lead to attractive margins, and currently the company's market cap sits at $212 billion.
If you are wary of risk, General Electric could be a great stock to invest in. Some think the markets are starting to bounce back following a successful Greek election, which would help GE even more.
Furthermore, with China's recent reduction of interest and deposit rates, the markets are showing some glimmering optimism that we have not seen in a while. This reduction will also help General Electric (and the global markets) in the energy and healthcare sectors, which will push further gains due to lower borrowing costs. GE is consistently successful in taking the world's best and most innovative technologies and applying them for high efficiency and results. It is truly a monster powerhouse in every industry it operates under.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.