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General Electric Will Light Up 2014

NEW YORK (TheStreet) -- Technology and infrastructure giant General Electric (GE - Get Report) began the year by focusing on growth of its industrial business and improvement in margins. GE, the world's leading jet engine and medical scanner maker, is now moving forward with its plan to reduce its reliance on the financial sector. For 2014, GE is targeting up to a 5% increase in sales, while its industrial division could contribute up to 70% of profits. With cost cutting measures and top-line growth, the business will consistently improve its profitability through 2016.

Over the next couple of years, GE is looking for significant growth in international markets, driven by China and other regions rich in natural resources. The company's takeover strategy will fuel its inorganic growth. Meanwhile, General Electric will continue rewarding shareholders through dividends and buybacks. The business also gives an attractive yield of 3.20%, which is twice as big as the industry's average.

I am staying bullish on General Electric. The business's stock dropped by nearly 2% recently, to $27.48 at market close on Friday, on slightly negative news. I believe this makes General Electric a strong buy.

Improving Profitability

GE could enter 2014 on a high note. The business is expecting to report strong performance in the fourth quarter of 2013. It has better organic growth, plus a margin expansion of 70 basis points from its Industrial segment. Over the past year, the company has poured investment into its Industrial segment. This will cause double-digit year-over-year bottom-line growth from its Industrial unit to be reported for the second half of 2013.

In 2014, the Industrial unit will  report around 4% to 7% organic growth, which should offset the decline coming from GE Capital. As a result, in 2014, GE could report between 0% to 5% overall growth in sales.

The business has consistently grown the margins of its Industrial unit since 2011. This trend will likely continue through 2014. For 2013, the operating margin of the Industrial unit climbed to 15.8% from 15.1% in 2012 and 14.8% in 2011.

When 2013 results are tallied, GE will have cut more than $1.5 billion in costs. They will follow this with another $1 billion reduction in 2014.

Overall, through cost cutting and margin expansion measures, GE will push its manufacturing margins to 17% by 2016.

Power and Water and Transportation Segments

General Electric's Power and Water segment has struggled in the past due to a drop in demand for power turbines. The company is expecting a turnaround in 2014, despite challenging market conditions in the developed world, due to an uptick in power turbine demand. This follows a shift in demand to the developing markets. The continued cost-cutting initiatives in this segment will also improve the unit's profitability.

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