General Electric Company (GE): The Three Reasons Why This Industrial Giant Is Outperforming

Relative strength in GE’s key markets

Finally, GE is relatively well-exposed to the growth areas in the industrial sector in 2013. The relative strength in the aerospace and automotive sectors has been a recurring theme of investing in the industrial sector this year.

Indeed, Alcoa Inc (NYSE:AA) noted a similar trend in its recent results. Alcoa investors should note that, on its conference call, GE discussed its gas turbine orders, and said that “the overall market is not going to be quite as strong as we had initially expected.” In contrast, Alcoa left its forecast for industrial gas turbines unchanged.

GE also has heavy profit exposure to other sectors that are outperforming, such as oil & gas, and transportation. The most surprising result probably came from its health-care segment.

Healthcare giant Johnson & Johnson (NYSE:JNJ) has a large medical device and diagnostics division (40% of sales) that achieved tepid growth of only 0.5% (excluding acquisitions) in the last quarter. Moreover, Johnson & Johnson (NYSE:JNJ) described the U.S. hospital capital expenditure market as being in a recession for the last 10 to 12 quarters.

General Electric Company (NYSE:GE)’s healthcare sales told a similar story. Its strong expansion in growth markets (revenues up 10%) managed to offset weakness in developed markets (where revenue declined 4%), resulting in flat revenue for the quarter.

Where next for General Electric?

In conclusion, revenue growth will be hard to generate in 2013 due to a weak global economy, but GE has enough exposure to the end markets that are doing relatively better. Conditions could hardly get much worse for its European power & water operations, and going forward, GE will start to lap some easier comparables.

The underlying performance on the industrial side is relatively good for the sector, and GE represents one of the better ways to play the industrial sector this year. It’s well worth looking at.

The article The 3 Reasons Why This Industrial Giant Is Outperforming originally appeared on Fool.com and is written by Lee Samaha.

Lee Samaha has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of General Electric Company and Johnson & Johnson. Lee 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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