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General Electric Rose ~4%, Most Gas Turbine Orders in 2018

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Most gas turbine orders

General Electric (GE) shares rose ~4% on February 13. Reuters reported that the company’s Power division had the most orders for gas turbines in 2018. Citing McCoy Power Reports data, Reuters revealed that GE Power had 33% of the overall orders for electricity generating gas turbines. Mitsubishi Hitachi and Siemens had 31% and 26%, respectively, of the total orders.

General Electric dominated its competitors in orders for the older generation F-class turbines. However, the company slipped to the second spot in orders for bigger and more advanced gas turbines that can produce 100 megawatts or more energy. In this segment, Mitsubishi Hitachi accounted for 41% of the total orders, while GE Power accounted for 28%, and Siemens accounted for 25%.

In the newest-generation turbine category, which is also called the “post F-class,” GE Power lagged behind Mitsubishi Hitachi. Among the total orders, Mitsubishi Hitachi, General Electric, and Siemens rose 49%, 34%, and 16%, respectively.

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Trouble still looms

Although General Electric had the most gas turbine orders last year, the deal hasn’t always been attractive for the company. In a recent interview, General Electric’s CEO, Larry Culp, hinted that previous leaders focused on obtaining higher orders to increase the company’s market share. However, some of the terms weren’t attractive, which cost the company millions of dollars.

General Electric had to record a $750 million charge in its Power division last year to reflect these realities. GE Power reported a decline in its order value and revenues of 23% and 22%, respectively, in 2018. The division recorded an operating loss of $808 million in 2018—compared to an operating profit of $1.95 billion in 2017.

Once the company’s primary growth engine, General Electric’s Power division has been struggling to cope up with changing industry dynamics. The business unit has been underperforming for years. The demand for renewable energy and energy efficiency hampered the demand for fossil fuel–based power plants. General Electric’s Power division’s performance depends on the coal and gas turbine market.

Over the past few years, companies like Dominion Energy (D) and Vistra Energy (VST) have lowered their dependence on fossil fuel–based power plants and have shifted their focus to renewable sources.

To gain exposure to General Electric, investors could consider the Industrial Select Sector SPDR ETF (XLI), which has allocated ~3.4% of its fund to the stock. XLI has also invested ~5.3% of its funds in 3M (MMM).

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