About GE’s Energy Management segment
General Electric Company (GE) aspires to be a global technology leader in the transmission, distribution, and conversion of electrical power. In fiscal 2015, the energy management segment contributed ~6.9% to the company’s total industrial revenue and ~1.5% to its consolidated operating profit, with an operating margin of 3.6%.
Its product portfolio has electrical distribution, control products and services, lighting and power panels, grid management products, grid modernization services, industrial automation and software solutions, advanced motor, and drive and control technologies.
Industrial solutions, digital energy, and power conversion are unique services and products of GE, and GE will continue to reinvest in its key products as its management foresees good growth and margin expansion in years to come. In fiscal 2015, segment revenue from servicing came in at 26% while revenue from sales of equipment was 74%.
Demand and concerns for the segment
The company foresees growth from its energy and marine industry to drive demand for power conversion equipment and services. Also, the Alstom deal should further bring robust growth in this segment, although slower European economic recovery will continue to be a matter of concern, as 18% revenue of GE-Energy is derived from Europe.
The energy management segment faces competition from businesses operating with a global presence and with deep energy domain expertise. The products and services sold to end customers are often subject to regulatory specifications and performance standards under different federal, state, foreign, and energy industry standards.
GE is part of the Industrial Select Sector SPDR ETF (XLI) and accounts for 11.78% of XLI’s total holdings. GE is also one of the top ten holdings of the Vanguard High Dividend Yield ETF (VYM), accounting for 3.6% of VYM’s total holdings. Microsoft (MSFT) and Exxon Mobil (XOM) are among the top holdings in the fund.