Analyse aandeel General Electric

General Electric positioneert zichzelf vooraan in alle markten waarop het actief is. (Engelstalig rapport)

Daniel Holland 08 oktober, 2013 | 8:38

INVESTMENT THESIS

General Electric positions itself to be a leader in all markets in which it competes. After shedding underperforming businesses during the past few years, the firm has energy infrastructure square in its sights. We believe GE will emerge as a leader in the power infrastructure market, which will be the backbone for the firm's growth.

GE makes its mark by combining businesses with strong synergies and opportunities for information-sharing across business lines. Add to this GE's ability to invest large amounts of money in expanding businesses, and barriers to enter a new market are significantly lower. With its proven ability to drive improvement in operating efficiencies, the firm is able to generate healthy returns on invested capital in many of its markets.

The portfolio of businesses continues to be correlated with industrialization and the needs of growing economies. GE has changed its focus as the world has shifted; it now has a heavy focus on clean-energy products, such as wind and gas turbines. The strength of GE's competitive advantage is most notable in wind turbines, where the company was able to unseat longtime incumbent Vestas with its superior manufacturing execution and better customer satisfaction. Though the wind energy business is currently under margin pressure driven by oversupply, we continue to see GE emerging as one of the dominant players. Underscoring the benefits of a diversified business model, GE has remained agnostic to the fuel source for new power generation, with exposure to gas turbines and steam generation as well as renewable sources.

Since the collapse of the credit markets in 2008, GE has rebuilt its captive finance arm, improving capitalization and general business profitability, while working to pare noncore assets. Areas of focus will remain middle-market commercial and industrial loans, equipment leasing, and aircraft leasing. In each, GE is now competing with a stronger capital base and less competition. With near-term headwinds easing, investors should benefit from a better-capitalized bank with higher asset quality over the long run.

VALUATION

Economic Moat   Fair value   Stewardship Rating   GE
Wide   USD 29.00   Standard  
Moat Trend   Uncertainty   Sector  
Stable   Medium  

Industrie - industriële producten


BULLS

  • With the problems created by GE Capital further in the rearview mirror, GE now has time to focus efforts on building its wide-moat industrial businesses.

  • The disposition of the remaining stake in Comcast boosts GE's cash position and allows the infrastructure businesses to receive more capital and management attention.

  • GE's global presence allows access to more information about the direction of economic activity than other firms, giving the company an advantage in getting its feet on the ground in emerging economies.

 


BEARS

  • Efficient manufacturing programs like Six Sigma and lean manufacturing have been around long enough for other firms to successfully implement and catch up to GE, reducing the strength of GE's cost advantage.

  • GE's earnings may become more cyclical with the departure of NBC Universal, the shrinking weight of lighting and appliances, and the departure of retail finance from the portfolio. The market typically places a premium on more-stable earnings bases.

  • Acquiring Alstom required GE to commit to building European manufacturing capacity, which may be difficult to pare going forward.

 

 

 

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Effecten genoemd in dit artikel

Naam effectPrijsChange (%)Morningstar Rating
3M Co173,38 USD0,02
General Electric Co10,28 USD-1,91

Over de auteur

Daniel Holland  Daniel Holland is a stock analyst with Morningstar.