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General Electric to Upgrade Saudi Cement's GE 6B Gas Turbines

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General Electric Company’s GE Power Services business recently entered into an agreement with Saudi Cement to upgrade the latter’s three GE 6B gas turbines at Hofuf plant, based in the Kingdom of Saudi Arabia. Per the deal, GE Power will upgrade these turbines by installing its Advanced Gas Path (AGP) solution, which would enable Saudi Cement to boost power output and efficiency.

Notably, this deal marks the first installation of GE Power’s AGPtechnology solutionto boost power generation productivity in a cement industry globally. Currently, it will enable Saudi Cement to boost power output by a total of up to 16.9% across the three turbines.

This apart, General Electricalso secured a $52 million contract from Dubai Electricity and Water Authority. Per the deal, General Electricwill install its AGP technology solution on three GE 9E gas turbines at the Jebel Ali Power & Desalination Station. It clinched another service agreement from Ohgishma Power Co. Ltd. to upgrade three GE 9F gas turbines with AGP, DLN2.6+ and OpFlex technologies at the Ohgishima Power Station, based in Kanagawa.

Our Take

General Electric is poised for long-term growth backed by improved performances from the emerging markets like India and China. In order to focus more on its core business activities, the company has exited from the financial business and has increased its investments in key industrial businesses through restructuring, state-of-the-art technology, and R&D initiatives. Notably, General Electric’s three core segments — power, aviation and healthcare equipment — require advanced hi-tech products with a high degree of reliability. These products often generate higher margins and are likely to contribute to improved long-term growth.

With the company boasting a strong international presence, significant portion of the company’s total revenues are generated from emerging markets. In fact, General Electric has been selling big-ticket items such as locomotives and power turbines to India and China. Moving ahead, it expects to benefit from these regions, given their faster economic growth.

In the past three months, shares of this Zacks Rank #3 (Hold) company have lost 2.3%, outperforming the industry’s decline of 4.8%.

Furthermore, General Electric’s solid free cash flow allows it to invest in product innovations, acquisitions and business development. This, in turn, offers the company a competitive advantage over its peers. Its stringent cost-cutting measures are also likely to improve profitability, going forward.

Stocks to Consider

Some better-ranked stocks from the same space include Honeywell International Inc. HON, Federal Signal Corporation FSS and Quanta Services, Inc. PWR. All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Honeywell surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 1.5%.

Federal Signal outpaced estimates in the preceding four quarters, with an average earnings surprise of 16.1%.

Quanta Services surpassed estimates thrice in the preceding four quarters, with an average positive earnings surprise of 6.7%.

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