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General Electric Company (GE), Lufkin Industries, Inc. (LUFK), Comcast Corporation (CMCSA): The Best Is Yet To Come

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General Electric Company (NYSE:GE) stock plunged around 4% since the announcement of its first quarter 2013 earnings. The quarter earnings increased by around 16% and were above the Street’s expectations by a slight margin. Also, the operating EPS rose by 15% to $0.39, as compared to the analysts’ estimate of $0.34. Despite this, the stock reacted adversely to the news, due to the dull profit outlook emerging from a weaker Europe. This affected the company’s overall industrial profit margin. The margin reported in this quarter was 12.9%, down from 13.7% in the same quarter, a year ago. The overall revenue from the region decreased around 17% on yearly basis. Even though General Electric Company (NYSE:GE) was expecting gloomy results from this region, I feel this was certainly worse than expected and hurt investors’ sentiments.

General Electric CompanyOn the positive front, the company’s revenue increased slightly to $35 billion, led by robust sales of aviation and home equipment. This helped the company to surpass the analysts’ expectation of $34.51 billion. General Electric Company (NYSE:GE)’s order backlogs, which determine the future stream of profits, remain solid. The company’s equipment order increased by 10%, driven by 47% increase in aviation orders and 24% increase in oil and gas orders. The total backlog for orders stood at $216 billion, which is up from $210 billion at the beginning of 2013. The backlog for General Electric Company (NYSE:GE) has consistently grown over the last few quarters, showing strong demand among its customers. This is also favorable for the company’s future prospects, as it gives an assurance about the future revenue generation.

Let’s discuss some of the recent happenings in the company, which will drive its future earnings capacity.

The acquisition

Recently, General Electric Company (NYSE:GE) announced its acquisition of Lufkin Industries, Inc. (NASDAQ:LUFK) for more than $3 billion. With this acquisition, General Electric Company (NYSE:GE) aims at developing its oil and gas segment with Lufkin Industries, Inc. (NASDAQ:LUFK)’s experience in artificial lift technology. Lufkin Industries, Inc. (NASDAQ:LUFK)’s technology is used in 94% of the oil wells in production worldwide, and that market is still expanding. It forms an integral part of the oil and gas industry, and the sector is expected to reach $13 billion in 2013. I believe this acquisition is a perfect fit in General Electric Company (NYSE:GE)’s product portfolio, and will broaden its market presence in the oil and gas equipment segment. This segment has grown rapidly at an annual rate of 16% in the last three years, mainly supported by strong acquisitions. Moreover, it is the fastest growing business for GE and the company will capitalize this growing opportunity via this deal. I expect that after this acquisition, this trend will continue in the future, as this advanced product portfolio will help GE to grow, overcoming any minor headwinds.

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