GE Well-Positioned for Global Recovery

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Trefis) -- General Electric ( GE) has very often been regarded as a bellwether for American industrial and transportation because of its size and presence in various segments of these industries.

This belief has been further strengthened by the correlation between its stock and GDP growth for the U.S. GE's stock had been a good leading indicator of the financial crisis of 2008 and has traded between $10 and $20 since its market low of March, 2009.

GE has a huge presence in emerging markets and is earning in excess of 60% of its revenues from outside the U.S. As a result, we expect that over time it will start to reflect the growth of global economy rather than just the U.S. So how will the emerging trends in the global economy impact GE?

See our full analysis of the General Electric stock here.

A global economy recovery would bode well for the company. It would increase demand for commercial aviation and energy, thus helping GE's technological infrastructure businesses. An improving jobs market would lift sales for GE's home and business solutions division. Most importantly, a global recovery improve the outlook for the U.S., which is crucial since it represents GE's biggest single source of revenue.

The effect of a slowdown in growth in China on GE would be modest as the Chinese economy continues to grow at a healthy pace. The company's backlog in this region is strong enough to see it through slower growth. We expect new orders will keep flowing and the company will continue to do well in the region. The demand for energy, oil and gas, infrastructure and mining equipment, which has been fueled by the need for energy by Chinese economy, will still continue growing at a healthy pace.

Emerging market growth is expected to become the biggest source of growth for GE in the future. The company is focusing intensely on the smaller markets of South East Asia and Africa that are expected to show a rapid growth in their economies in the near future.

It has also chalked out a strategy which looks at the South East Asian region with Thailand as its hub. The company has seen this strategy pay dividends as a result and recorded 30% sales growth in Thailand this past year. This trend is expected to continue well in the future as well. One example is the the commercial aviation business that is expected to grow at a very rapid pace in these countries.

The sovereign debt crisis in Europe is a major source of concern for GE and will have a sizable negative impact on the company. Demand in Europe has been soft for a number of quarters now and has more or less negated the gains the company expects from the economic recovery in Western Europe. The sectors that have been particularly hard hit are health care and aviation. The company is reducing its capacity in these sectors to address this decline.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.