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GE to Buy Lufkin Industries in $3.3B Cash Deal (Update 4)

Jim Cramer said late Monday morning that investors should " buy GE's stock "right here," and that GE "will be, if I am right, the premier energy service company, after Schlumberger (SLB - Get Report), in the world, after a few more acquisitions."

"There are all sorts of companies that GE could buy, to make a statement in this sector," Cramer said.

Credit Suisse analyst Julian Mitchell rates GE a "outperform," with a price target of $25, and in a note to clients on Monday called the Lufkin acquisition a "smart strategic fit."

"This deal more than doubles GE's current 5% share in Artificial Lift, giving it ~15% market share once the deal is completed," Mitchell wrote, adding that "the 13.5x EBITDA multiple paid... on 2013 estimates is slightly aggressive relative to other industrial transactions... [but] LUFK's attractive market share in artificial lift and competitive positioning suggests it should command some premium over an average deal."

GE is scheduled to announce its first-quarter results on April 19, with the consensus among analysts polled by Thomson Reuters being earnings of 35 cents a share, compared to 44 cents a share during the fourth quarter and 34 cents a share in the first quarter of 2012.

Shares of General Electric have returned 11% this year, following a return of 21% during 2012. The shares trade for 12.5 times the consensus 2014 EPS estimate of $1.85. The consensus 2013 EPS estimate is $1.67.

Based on a quarterly dividend of 19 cents, GE's shares have a yield of 3.29%.

At the end of 2012, General Electric was authorized by its board of directors to repurchase roughly $14.9 billion worth of common shares. The company's share buybacks during 2012 came to $5.2 billion.

Interested in more on General Electric? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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