Could General Electric Company (GE) Energize Your Portfolio?

A solid quarter for oil and gas
During the company’s recent post-release conference call, Keith S. Sherin, GE’s vice chairman, summed up General Electric’s successes in oil and gas by noting:

Results…were very strong. Orders of $5 billion were up 24%. Equipment orders of $2.8 billion were up 42%. We saw double-digit growth across all the segments with turbo machinery up 74%, driven by U.S. midstream LNG orders. Subsea was up 30% , driven by large projects in Indonesia and Angola. Service orders at $2.3 billion were up 8%. We saw a nice growth in global services, up 14%.

From a purely analytical perspective, it’s worth noting that quarterly revenues attributable to oil and gas have increased by an average of about 3% per quarter since the start of 2012. At the same time, through buybacks and a 3.10% forward annual dividend yield, as CEO Jeffrey Immelt noted on the call, the company is on track to return $18 billion to shareholders this year. At the same time, it’s sitting atop more than $132 billion in cash.

Another shopping spree?
The last figure is hardly inconsequential. As I noted above, Lufkin Industries has just become part of the General Electric Company (NYSE:GE) fold. I’m not at all convinced, however, that other significant purchases aren’t in the offing. One name that has been bandied about by oil-field services types is Weatherford International Ltd (NYSE:WFT).

By my calculation, Weatherford International Ltd (NYSE:WFT)’s $19 billion in enterprise value — which obviously includes its nearly $9 billion in net debt — comes to just 7.9 times its trailing-12-month EBITDA. The Geneva-based integrated service provider, which has been battling tax difficulties, would seemingly constitute an ideal arrow for GE’s oil and gas quiver.

Foolish takeaway
There obviously are other aspects of General Electric’s business portfolio that make for a compelling opportunity. However, the company’s being catapulted into a leading position in the oil and gas services sector that, for my money, makes it well worth Foolish scrutiny.

The article Could General Electric Energize Your Portfolio? originally appeared on Fool.com and is written by David Smith.

Fool contributor David Smith has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company.

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