General Electric Company (NYSE:GE) recently gave its 2017 annual outlook and reaffirmed it's on track to hit $2 in EPS by 2020. That's all well and good, but investors are always looking for upside potential from management's guidance. Well, the good news is there's plenty of it at General Electric, so let's look at five ways the company could exceed its earnings targets.

Oil

AN IMPROVEMENT IN OIL AND GAS CAPITAL SPENDNG WOULD HELP GENERAL ELECTRIC COMPANY. IMAGE SOURCE: GETTY IMAGES.

General Electric Company's 2020 outlook

Starting with the plan, CEO Jeff Immelt reaffirmed guidance for EPS of $1.48 to $1.52 in 2016 and detailed how the bridge to $2 in 2020 would be made. Since the company has around $9 billion in average diluted shares outstanding at present, I've calculated the impact to net income in the bullet points:

  • Share buybacks will contribute $0.16 in EPS, or $1.44 billion.
  • Capital allocation -- primarily through mergers and acquisitions activity, including the Baker Hughes (NYSE:BHI) merger and Alstom energy assets acquisition -- will contribute $0.15, or $1.35 billion
  • Operations will contribute $0.18, or $1.62 billion.

Of course, these assumptions are already baked into guidance, and the market will have factored them into its valuation of the stock, but what about potential upside?

Baker Hughes' cost synergies

At the time of the initial announcement of the Alstom deal in 2014, management expected $1.2 billion in cost synergies by 2020, but after a process of working on the integration, management upgraded this forecast to $3 billion in May 2015. It's entirely possible that expectations might also be upgraded for Baker Hughes.

Oil and gas capital spending

Weakness in oil and gas capital spending was the primary reason for the cut in the company's full-year 2016 organic revenue growth guidance from 2%-4% to 0%-2%. Therefore, it's fair to say that energy spending will play a key role in the company's growth prospects in future years.

Furthermore, the Baker Hughes deal is likely to increase the company's exposure to oil prices. Any sustained recovery in oil prices is likely to help General Electric Company.

The digital economy and additives

Immelt expects 3% to 5% overall organic revenue growth in and it's hard to see what specific product or service can move the needle much with a company generating $124 billion in revenue. That said, if there is anything that will do it, it'll be the company's digital solutions.

Immelt expects $8 billion in digital orders with Predix-powered (a cloud-based platform-as-a-service solution) and software orders contributing $5 billion and growing at a 20% to 30% rate. Given that accelerating Predix adoption is a key focus for the company, it's possible that the company might surpass its target of $15 billion in revenue from the industrial internet by 2020.

Similarly, Immelt is busy investing in additive manufacturing (3D printing) solutions and is on record as believing the company could reach $1 billion in additive manufacturing revenue by 2020. However, with more acquisitions and faster global adoption of 3D printing, this forecast could be increased.

Services

The coming year looks set to be a better one for services growth. Following annualized growth of 5% between 2011 and 2015, General Electric Company is on track to only generate 3% services revenue growth in 2016. The reason?

It's a familiar story of weak oil and gas spending. In fact, excluding oil and gas, services revenue will rise 6% to 7% in 2016. As for 2017, Immelt predicts 7% services revenue growth. This is important, because services revenue tends to be higher-margin for the company, and it's a key part of the company's transformation.

In addition, its industrial internet solutions provide a value-add to General Electric's equipment and are likely to spur services revenue. For example, sensors on a gas turbine can alert a user to when to get the turbine serviced, to optimize performance.

Ge Heavy Duty H Turbine

GENERAL ELECTRIC'S HEAVY DUTY H-TURBINE IS A LEADER I ITS CLASS. IMAGE SOURCE: GENERAL ELECTRIC COMPANY WEBSITE

Looking ahead

All told, putting aside its existing outlook, the company has potential to surprise on the upside. A company like General Electric is never going to be a high-growth flier, but that doesn't mean it doesn't have high-growth products and services -- think digital solutions and additive manufacturing. Moreover, simple execution with its mergers and acquisitions could lead to increased profitability.

However, the most obvious near-term catalyst would come from finding more cost synergies with Baker Hughes and/or a general upturn in oil and gas capital spending. In short, don't write of the upside potential at the company, because there may yet be upside to the $2-by-2020 target.

Lee Samaha has no position in any stocks mentioned. The Motley Fool owns shares of General Electric. 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.