This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Why General Electric Stock Can Still Shock Investors After Alstom

NEW YORK (TheStreet) -- General Electric (GE - Get Report) finally won its $17 billion bid for the assets of struggling French company Alstom (ALSMY). While this may have been a surprise to many investors and analysts, to GE CEO Jeff Immelt it was only a matter of when, never if.

GE stock closed Monday at $26.28, down 6% on the year to date. With its shares still down 35% from their 2007 high, investors should jump on GE now.

At the current price and with the potential synergies from Alstom, GE stock is a sure bet to reach $35 in the next 12 to 18 months assuming GE can grow its revenue at a long-term rate of 4% to 5%. And if Immelt can return GE to the low teens in free cash flow margins, $40 per share during that span is not out of the question, either.

With Alstom's assets entering GE's possession, the next 10 years of GE's growth are likely secured because aside from helping GE achieve its goal of returning to its industrial roots, Alstom's businesses will help GE gain exposure in untapped European markets.

>>Carlos Slim Ends Ties to AT&T With America Movil Stake Buy

My reference to Alstom's "assets" is not by accident. Recall, GE entered the deal wanting only the power business. But the opposition by the French government forced GE to agree to some concessions, including allowing the French government to retain a 20% stake in Alstom. Immelt also agreed to allow Alstom to keep a 50% interest in three energy joint ventures.

The way I see it, these were small prices to pay for having landed the prize of the whole deal.

When it was all said and done, GE has acquired all of Alstom's global gas and steam turbine equipment and services business. Combined, these businesses -- which have a large customer base in Europe -- generate more than $10 billion in annual revenue.

Immelt has been clear about his vision of GE as a global industrial power. In the most recent quarter GE posted 14% revenue growth in both aviation and power/water segments, its two largest industrial businesses. This is while GE's oil and gas division posted revenue gains of 27%. But it's about the future.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
GE $27.27 -1.30%
AAPL $130.28 -1.14%
FB $79.19 -1.19%
GOOG $532.48 -1.40%
TSLA $250.75 -0.28%

Markets

DOW 18,010.68 -115.44 -0.64%
S&P 500 2,107.39 -13.40 -0.63%
NASDAQ 5,070.0260 -27.95 -0.55%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs