GE’s Power and Water segment’s contribution
General Electric’s Power and Water Segment contributed 23% of the company’s total revenues in 2015. GE’s mission is to maintain its leadership positive globally in power generation and water technologies space. During fiscal 2015, the segment contributed ~25.5% to its total industrial revenues and ~27.5% to its consolidated operating profits, with an operating margin of 17.8%.
This segment’s major products includes gas turbines, engines and generators, steam turbines and generators, wind turbines, nuclear reactors, water systems, and power generation services. It serves power generation, industrial, government, and other customers worldwide with products and services related to energy production and water reuse. In 2015, revenue from servicing from the segment was 63%, while revenue from the sale of equipment is 37%.
Global power equipment industry
The power generation equipment industry is made up of various sub-industries, each with a structure of its own. There are a few integrated players with capabilities across various functions of a power plant (boiler, turbine, and generator) as well as various fuel types. These players include GE Energy (GE), Siemens AG, and Mitsubishi Heavy Electricals.
Demand drivers and concerns
The company foresees good demand for H-technology turbines, services model, continued growth in natural gas, and strong global demand in renewables. At the same time, excess capacity in developed markets and macroeconomic and geopolitical environments can act as barriers to strong performance.
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.