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GE: $10B Infra Orders from Latin America

Zacks Equity Research

According to a Bloomberg report, diversified conglomerate General Electric Company (GE) is anticipating huge infrastructure orders to the tune of $10 billion in 2014 from Latin America on the back of surging demands for improved facilities for basic amenities and well-being. The news is encouraging for the company as it aims to focus on its industrial manufacturing roots and reduce dependence on the financial sector.

During the next few years, General Electric expects revenues to increase 10–15% annually in Latin America, buoyed by higher demand to cater to the infrastructure requirements for industrial services such as power generation, transportation, water and oil. The company expects to achieve this through growth in markets in Argentina, Peru, Colombia and Chile, partially offset by a slowdown in Brazil – the biggest economy in the region.

This is inspiring news for General Electric as it focuses on its core industrial businesses. In Mar 2014, General Electric filed an initial public offering (IPO) of its North American consumer lending unit to shrink its finance business by 2015. The strategic move was arguably the biggest step in restructuring GE Capital’s portfolio to shield the parent company from intense market volatilities that plagued the market during the 2008-09 financial crisis.

The spin-off will realign the corporate strategy of the company to a manufacturing-based entity with emphasis on big-ticket items such as medical equipment and scanners. With the spin-off, General Electric expects operating earnings from its industrial business to aggregate 70% of the total operating earnings of the company by 2015.

General Electric is one of the largest and the most diversified technology and financial services corporations in the world. With products and services ranging from aircraft engines, power generation, water processing, and security technology to medical imaging, business and consumer financing, media content, and industrial products, the company serves over 100 million customers worldwide. Its segments include Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Appliances & Lighting, and GE Capital.

General Electric currently has a Zacks Rank #3 (Hold). Other companies in the industry that are worth mentioning include ITT Corp. (ITT), Compass Diversified Holdings (CODI) and Carlisle Companies Inc. (CSL), each having a Zacks Rank #2 (Buy).

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