Major Bulls in the Electrical Industry

Sharmistha is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

With the industrial production growing at a healthy pace, boosted by strong manufacturing, and mining, the utility productivity is in high demand in this core area and is driving the industry to accelerated growth. The industry has been flourishing with an expected growth rate of 7%. The electrical industry greatly contributes to economic growth and job creation.

World over the use of electrical goods is now quite prevalent with nations investing a reasonable portion of their budgets to electric power generation. The use of electricity as the most efficient in the generation of any country’s wealth cannot be doubted. Electrical products have increased world over replacing most manual machinery, solar, and thermal equipment.

The Bulls

With a global economy still struggling and a lackluster job market notwithstanding, the U.S. is seeing some growth, particularly in the industrial sector. General Electric Company (NYSE: GE) takes the top spot with 12% share in the sector. The company offers products and services ranging from aircraft engines, power generation, water processing, and security technology to medical imaging, business and consumer financing, media content and industrial products. General Electric has "at least half a dozen potential catalysts that could lead to significant value creation" for shareholders, according to a Barclays report. In its last earnings release, General Electric Company increased revenue in nearly every segment, with earnings either increasing or decreasing marginally. GE s Energy business is poised for long-term growth. While the recently reported quarter reflects some challenges, there are some positive trends. The 100 day performance of GE is 14.27%. Compared to other stocks in the market, the performance of General Electric Co. has been above average. With a revenue growth of 2.5% the fundamental strength of the company is generation of strong free cash flow. Overall, the company reported a modest fourth quarter with earnings growth of 4% year over year and overall order growth of 15%. Recently the stock has outperformed the Dow (0.8% to the Dow's 0.4%) and the S&P 500 (0.8% to the S&P's 0.3%).Due to its expansive portfolio and stable financials, GE is a defensive asset capable of capital appreciation for the long term.

Competitors such as Siemens AG (NYSE: SI) and Koninklijke Philips Electronics NV (NYSE: PHG) are all in the same category. Siemens Enterprise Communications is positioned as a Leader based on the company's completeness of vision and ability to execute.

Both revenue and orders have increased year-over-year in the first quarter of fiscal 2012 and also sequentially for the sixth quarter in a row. The core business of Siemens have seen a pickup in demand and the company is well positioned and looking for further growth primarily in the emerging markets. Siemens makes its mark as the technology innovator in its markets, providing customers with solutions that few other firms can offer. The 100 day performance of SI is 13.78%. Compared to other stocks in the market, the performance of Siemens AG has also been above average. With a 52-Week High $145.94, and a 52-Week Low $86.96 the stock is well positioned. There are several analysts that rate Siemens as a strong buy. Siemens Healthcare is one of the rapidly growing segments of the company with good underlying profitability. The stock is showing a positive upward trend and is a must buy.

Over the past year, Philips Electronic has traded in a range of $16.56 to $24.99 and is now at $23.99, 45% above that low. Koninklijke Philips Electronics NV has revenue growth of 13%.

The Bottom Line

General Electric is a terrific, established technology company that has seen its share price rise over 16% thus far in 2012, General Electric's earnings per share increased again this past quarter, marking two straight years of EPS growth. GE's bottom line earnings were also increased from $1.14 per share in the previous year to $1.23 per share in the last fiscal year. Analysts expect EPS growth to continue as well, and expect the bottom line EPS to be $1.55 this year, an increase in $0.32 from the previous year. Much of the earnings growth can be attributed to the company's energy division. It's revamped, and has been growing at double digit rates, increasing overall company profits 13% alone. The stock has a lot of promise and will withhold its bullish trend. It is believed that Siemens has footholds in the markets with very worthwhile long-term fundamentals. Power gen, power transmission, renewable energy, factory automation, and diagnostics are all sizable global markets with above-average growth potential Siemens' is starting to look more and more like a global blue-chip that value investors ought to own.

Koninklijke Philips Electronics has shown a strong growth and profit potential it is considered a global leader in electronics. With over 120,000 employees in roughly 150 countries the company has attained global reach, wide product diversity and a strong brand name, along with world-leading market positions. A fairly cash-generative business coupled with strong liquidity and financial flexibility the ratings on the Netherlands-based diversified technology group Koninklijke Philips Electronics N.V. (Philips) has customer confidence attributes and worth investing.

Trust me the major bulls of the electrical industry GE, SI, and PHG are here to play long innings. The names are well established and all three are a value for money.

Interested in Additional Analysis?

For GE, the recent financial crisis struck a blow, but management took advantage of the market's dip to make strategic bets in energy. If you're a GE investor, you need to understand how these bets could drive this company to become the world's infrastructure leader. At the same time, you need to be aware of the threats to GE's portfolio. To help, The Motley Fool offers comprehensive coverage for investors in a premium report on General Electric, in which their Industrials analyst breaks down GE's multiple businesses. You'll find reasons to buy or sell GE, and you'll receive continuing updates as major events unfold during the year. To get started, click here now.

 

 

 


SharmisthaB has no positions in the stocks mentioned above. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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