Looking Ahead
GE’s future is bright. The company’s industrial segment should benefit as emerging markets develop and China emerges from its slowdown. GE capital will benefit with less loan charge offs as US unemployment rate falls. GE units Oil & Gas, Rail, and Power & Water will stand to benefit as US further develops its domestic shale resources.
Analysts are bullish on the GE as well. Deutsche Bank has a $28 target, while Barclays has a $26 target.
Versus competitors
Conglomerates 3M Co (NYSE:MMM) and United Technologies Corporation (NYSE:UTX) are both industry peers of General Electric. 3M Co (NYSE:MMM) produces everything from industrial adhesives to office supplies while United Technologies Corporation (NYSE:UTX) makes everything from elevators to airplane landing gear. They too, like General Electric, are deeply exposed to the US economy, and their bottom-lines have recovered as the economy has come out of its painful slump. Both stocks have dividend yields of 2% and are around all-time highs. 3M Corporation has returned 27% YTD while United Technologies stock has returned 30% YTD.
| P/E (ttm) | Forward P/E | 5-year PEG (expected) | Price to Sales (ttm) | Return on Equity (ttm) | Profit Margin | |
| General Electric | 18.40 | 13.66 | 1.36 | 1.74 | 11.86% | 9.74% |
| 3M Corporation | 18.34 | 15.86 | 1.83 | 2.67 | 25.70% | 14.80% |
| United Technologies | 15.29 | 14.71 | 1.23 | 1.58 | 20.49% | 10.16% |
| Advantage: | UTX | GE | UTX | UTX | MMM | MMM |
Source: Yahoo Finance
United Technologies is the better value in terms of price to earnings and growth while 3M Corporation is the better bet in terms of margins. This is mainly due to the fact that GE is so large and diversified versus its peers. GE is the only one of the three that has a sizable financial division. GE does have the lowest next year’s price to earnings ratio of the three conglomerates.
Conclusion
General Electric is the bellwether for the broader market. With the economy turning up, unemployment rate falling, and corporations continuing to spend in capital projects, the future is bright for General Electric. Both 3M Corporation and United Technologies are benefiting from the same macro recovery as GE and are also good additions to a portfolio.
The article General Electric: The Bellwether of the American Economy originally appeared on Fool.com and is written by Jason Bond.
Jason Bond has no position in any stocks mentioned. The Motley Fool recommends 3M. The Motley Fool owns shares of General Electric Company. Jason is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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