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GE Clinches Multiple Contracts, Provides Free Cash Flow View

Zacks Equity Research
·3 mins read

General Electric Company’s GE business arm GE Renewable Energy recently secured a contract from Megha Engineering and Infrastructure Limited. Per the deal, the company will deliver and commission 500MW of turbine capacity for the Kundah hydropower plant, located in Tamil Nadu, India. Financial terms of the deal were kept under wraps.

In addition, the company offered an update on its free cash flow expectations.

It’s worth noting here that General Electric’s shares were up 15.6% in the past couple of days to close at $7.05 on Thursday.

Inside the Headlines

The aforementioned contract will involve GE Renewable Energy to work on designing, producing, delivering and commissioning four 125MW fixed speed pumped storage turbines and motor generators. It will also provide excitation system, control & protection system and electronic governor for the new hydropower plant, which is to be run by Tamil Nadu Generation and Distribution Corporation Limited (“TANGEDCO”).

The company’s pumped storage technology will facilitate TANGEDCO in producing power, particularly during high electricity demand phases, with the utilization of surplus energy, obtainable on the grid. This, in turn, will support the production of sustainable and reliable energy apart from strengthening grid stability in the region. The hydropower plant is likely to be commissioned by September 2023.

In addition, General Electric’s Chief Executive Officer, Larry Culp provided an update on the company’s free cash flow expectations at a Morgan Stanley Laguna Conference, held on Sep 16.

For the second half of 2020, the conglomerate anticipates generating positive free cash flow. Also, it expects its performance during the second half of this year to build up the base for generating positive cash flow in 2021 as well.

Other Notable Developments

Also, on Sep 17, GE Renewable Energy entered into a contract with BKK, an energy company in Norway. Per the five-year license deal, the company will provide BKK with its digital asset performance management solutions, which will be deployed across 30 hydropower plants. This apart, General Electric’s business arm GE Aviation signed a long-term deal with Barnes Group Inc.’s B business arm Barnes Aerospace. Per the $700 million deal, GE Aviation will receive engine components for its LEAP engine program from Barnes Aerospace.

Zacks Rank and Price Performance

General Electric, with a $61.7-billion market capitalization, currently carries a Zacks Rank #4 (Sell). The company remains wary of the impact of the pandemic-related uncertainties on its operations — especially Healthcare, Aviation and Power — for the rest of 2020.

In the past three months, its share price has decreased 1.4% against the industry’s growth of 11%.

Stocks to Consider

A couple of better-ranked stocks from the same space are Griffon Corporation GFF and Danaher Corporation DHR. While Griffon sports a Zacks Rank #1 (Strong Buy), Danaher carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Griffon delivered a positive earnings surprise of 117.00%, on average, in the trailing four quarters.

Danaher delivered a positive earnings surprise of 10.83%, on average, in the trailing four quarters.

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