General Electric Company (NYSE:GE)
GE is one of the largest industrial conglomerates in the world. Its business is focused around a handful of segments that management believes hold material long-term value: Energy Infrastructure, Aviation, Healthcare, Transportation, and Home & Business Solutions. The company’s GE Capital financial unit is still a major part of the business, too, despite the fact that this division nearly brought the company down in the 2007 to 2009 financial led recession.
During the recession GE’s dividend, after years of regular increases, was cut and the stock price fell precipitously. That said, the company has been doing far more right of late, including a shift back to dividend increases. While not for the risk averse, largely because of the still notable reliance on GE Capital, a recent yield well over 3% might entice more aggressive investors.
General Electric is also making acquisitions in the lighting space to expand its presence. Moreover, it has scored notable LED sales have from far off lands like Indonesia, Hungary, and Malaysia. Closer to home, the Borough of Tarentum in Pennsylvania (population 4,500) is converting 100 percent of its street lighting to GE systems, saving up to $40,000 a year. Clearly, GE is in this game in a big way.
Some Companies
Not in the Space
Two other companies that will likely be impacted by LEDs in the future will be The Home Depot, Inc. (NYSE:HD) and Lowe’s Companies, Inc. (NYSE:LOW). Both are major hardware stores serving both the professional and individual markets. A quick walk into either store will reveal large lighting sections. The housing slump and recession took a toll on sales at these two companies, however, a big push into the housing market by companies like The Blackstone Group L.P. (NYSE:BX), suggest that we might be at the start of a housing turnaround.
If so, remodeling activity will likely increase as people spruce up new homes and rehab old ones to increase sales values. With LED technology finally hitting the mainstream, more and more projects will likely include the technology because it is the “best in class” option. Particularly if companies on the scale of Blackstone do renovations across massive single family home portfolios.
Since new technology usually carries higher margins, the sales mix in Home Depot and Lowe’s lighting segments is likely to improve. This will help results at both companies, though probably not materially enough to really move the earnings needle. While not nearly as direct a play as Philips or GE, this is an indirect, and perhaps safer, way to benefit from increasing LED sales.
The Future is Bright
LEDs are, at the moment, the clear winner in the lighting arena. As time progresses and costs come down, they are likely to push out Edison bulbs and florescent bulbs. Since many have already switched to fluorescents, with their relatively long lives, the shift to LEDs should have a long arc, giving investors plenty of time to benefit.
Yours,
The article LED Light For All originally appeared on Fool.com and is written by Reuben Gregg Brewer.
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