What This $11 Billion Order Windfall Means for General Electric Company

Huge purchases from around the globe signal that GE's transformation is well under way.

Jun 4, 2014 at 6:40PM

Even as French authorities give General Electric (NYSE:GE) the cold shoulder, other countries around the world are warming up to its charms. Over the past few days, Bloomberg reported that at least $11 billion worth of orders came into GE's grasp from a host of countries in Latin America and the African nation of Angola. In an attempt to revive the manufacturer of old, GE's finding growth in new and unexpected places.

To be sure, GE's had a foothold in both regions for quite some time, but it's the size of the opportunity that's started to put these areas more squarely on the radar. At a company like GE, after all, it's hard to move the needle when you're raking in $146 billion in annual revenue. The entire continents of Africa and South America, for example, each made up less than 10% of GE's revenue in 2013. The U.S., meanwhile, generates 47% on its own. But, when it comes to infrastructure needs, it's the former locales that represent the low-hanging fruit.

In Latin America, multiple countries not named Brazil are clamoring to upgrade everything from power generation to clean water to transportation. As GE's vice chairman John Rice pointed out to Bloomberg in May, "We are now starting to see real growth in Argentina, Peru, Colombia, Chile. It used to be kind of all about Brazil and Mexico."

This latest batch of orders is evidence of that shift. Of the $11 billion mentioned before, about $10 billion stemmed from emerging economies across Latin America, an area holding tremendous promise for infrastructure providers. GE's management team believes $50 billion in revenue could be unlocked in the region, which compares to only $13.1 billion as of the end of 2013. If GE wants to bolster sales from 59% to 65% outside the U.S. by 2020, as it has said before, it will need to stake its claim to these types of rising economies.

Across the pond, Africa is another example of a similar infrastructure development story. When GE's CEO Immelt took the helm in 2001, Sub-Saharan Africa was, in his words, "off the radar." By 2012, GE was driving $3 billion from that region, however, and Immelt speculated that Angola in particular could be a "$1 billion Franchise" over the next few years. Well, this recent order takes it a step closer to that goal. The total purchase amounts to roughly $1 billion, but the order could take much longer than a year to fulfill. Nevertheless, signs point to GE achieving that $1 billion run rate in Angola in the near future. According to the International Monetary Fund, Angola's $122 billion economy is forecast to expand by 5.3% this year, and by 5.5% and 5.9% in the following two years. As a resource-rich region, expect much of that growth to translate to either energy- or infrastructure-related projects for companies like GE.

Ge

GE's high-efficiency 9HA gas turbine. Source: General Electric.

Where GE's headed
What's most important about these announcements is that they signal that GE's industrial reboot is well under way. Of all the objectives laid out by management in their latest outlook (link opens a PDF), the rebalancing of the portfolio away from non-financial businesses is by far the most important.

Some of this balance will come from organic growth, particularly overseas, as evidenced by these latest deals. On the flip side, GE's looking to acquire industrial revenues through opportunities like the Alstom buyout. From management's perspective, this will translate to a globally diversified leader in manufacturing, especially since 85% of Alstom's revenue stems from regions outside of North America. For GE, it's one step toward streamlining its business and one step toward expanding its global reach. For shareholders, that's two steps in the right direction.

GE's onboard for a $14.4 trillion revolution. Are you?
Have you ever dreamed of traveling back in time and telling your younger self to invest in Apple? Or to load up on Amazon.com at its IPO, and then just keep holding? We haven't mastered time travel, but there is a way to get out ahead of the next big thing. The secret is to find a small-cap "pure-play" and then watch as the industry -- and your company -- enjoy those same explosive returns. Our team of equity analysts has identified one stock that's ready for stunning profits with the growth of a $14.4 TRILLION industry. You can't travel back in time, but you can set up your future. Click here for the whole story in our eye-opening report.

Isaac Pino, CPA owns shares of General Electric Company. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers