On other hand, GE will witness a decline in revenues from its Transportation segment because of weakness in the North American coal market. The persistent softness in the mining industry will continue to hurt this segment.
This is also evident in the performance of other players in the mining industry. For example, Caterpillar (CAT) is also struggling due to a significant drop in demand. In 2013, Caterpillar reported three reductions in its annual guidance. The business has recently reported a 12% decline in retail sales for November, after 12% and 9% drops in October and September respectively. With persistent weakness in the Resource Industries segment, Caterpillar is now betting on its Power Systems unit for a turnaround.
For the next several years, GE is quite optimistic about its growth prospects in Mexico and China. However, it will have a tough time in some other markets, like India and Brazil, where it already had a difficult year.In China, the company will continue to grow its orders from $6 billion in 2012 to nearly $8 billion in 2013. Moreover, the business will find significant growth opportunities via China's 5-year plan. As a result, the revenues from GE's Aviation, Power and Water, Healthcare and Oil and Gas segments in China could double by 2020. The company has also identified several resource-rich regions, ranging from Africa to Canada to Saudi Arabia, which will add around $50 billion to GE's order book by 2015. That is significant growth from less than $10 billion in 2001. Inorganic Growth Despite large divestitures, GE will continue to grow due to acquisitions. In the last three to four years, the company has sold around $24 billion in assets, including the recent $500 million sale of GE Healthcare's Vital Signs unit to CareFusion (CFN). Offsetting these sales are several acquisitions in the same period, worth $23 billion in total. Moreover, the business will spend between $1 billion and $4 billion on acquisitions in the coming years. Dividends and Buybacks In 2013, GE returned $18 billion to shareholders through dividend and buybacks. The company will go for a small increase in its payout ratio in 2014. The firm has recently increased its quarterly dividend by 16% to $0.22 per share. In the last three quarters of the current fiscal year, the company has paid $5.8 billion in dividends to investors, representing a payout ratio of more than 59%. By 2015, GE will buy back more than half a billion shares. Essentially, General Electric's shareholders, through dividends and buybacks, will continue to enjoy healthy returns.
At the time of publication the author held no positions in any of the stocks mentioned. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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