Is a New GE Under Construction?
General Electric (NYSE:GE) has finally given investors some faith that the conglomerate can, at long last, grow.
While companies throughout the world are cutting back and reporting losses, General Electric has announced that sales of high-priced items, like jet engines, gas turbines, energy infrastructure, and locomotives, are increasing.
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Company Chief Executive Jeff Immelt told analysts at an investor meeting in New York on September 27 to expect GE’s underlying industrial sales, excluding acquisitions and disposals, to rise 10 percent in 2012.
These gains will go along way to reverse the five-year long revenue decline that has plagued the company.
Until Immelt took office in 2001, former CEO Jack Welch built the modern company on massive acquisitions. Since Welch left the company, Immelt has drawn intense scrutiny: the divestitures he made during the financial crisis raised concerns over future profits, the company’s stock price dipped from approximately $40 per share when he took office to around $20 per share, and MarketWatch columnist Brett Arends called him a “disasters.”
However, analysts are betting that the companies expansive industrial portfolio and deep pockets will finally buy growth for General Electric’s shares.
Immelt has spent his ten plus years as CEO making the company more diversified and less volatile. In addition to the large, gas power turbines that made GE an industry leader decades ago, the company now sells wind turbines, smart grid systems, and oil and gas technology. He cut the stock’s dividend, which earned him the ire of investors, in favor of increasing research and development spending well above the company’s traditional levels. These changes have resulted in 12 new jet airplane engines this decade.
Revenues are up in all of General Electrics industrial segments this year, which has helped shares gain value this year. The company has already promised to buy back shares and raise dividends.
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