There were many positive aspects to General Electric’s (NYSE: GE) second quarter results, reported on July 20, and GE stock continues to have multiple, positive, strong longer-term catalysts.

Investors should definitely buy GE stock.

Power Business Showing Green Shoots

The company’s struggling Power business, its largest unit by revenue, beat expectations in the second quarter and showed several green shoots. The segment’s revenue came in at $7.6 billion, significantly above the Zacks consensus outlook of $7.285 billion and its first-quarter topline of $7.22 billion.  Additionally, the unit has a backlog of 82 gas turbines,  and GE believes that it will ship a total of only 50 turbines this year.

Moreover, GE predicted that the division would benefit from a  “solid pipeline of activity in the second half.”  Given this information, it seems like there’s little chance of the segment missing expectations for the rest of the year, while the unit has a very good chance of significantly beating consensus forecasts in the second half of 2018.

Meanwhile, GE’s aviation unit, its second largest division by revenue.  continued to perform very well, and the backlog of the company’s Renewables division jumped 32% year-over-year.

Natural Gas Isn’t Dying

According to many pundits,  increased usage of renewable energy has sharply lowered natural gas demand, permanently crippling GE’s Power business and GE stock. But just last month,  the International Energy Agency predicted that demand for natural gas would increase 1.6% this year.

Meanwhile “demand for natural gas is surging” in China, Japan, and a few small markets, The U.S. News and World Report stated in March. With China and Japan poised to buy more products and services from  U.S. companies as part of upcoming trade deals with the U.S., there’s an excellent chance that those countries will hire GE to build and repair their natural gas power plants. Furthermore, GE has obtained significant business deals from Saudi Arabia. 

Some GE bears have said that cheaper electric storage solutions will boost renewable energy at the expense of natural gas. Yes, that trend could start to occur ten years from now. But over the next decade, countries and companies aren’t going to tear down their natural gas plants, and not all of the new plants they build will be powered exclusively by renewable energy. Instead, the current trend of natural gas plants and renewable energy plants replacing coal plants will continue for many years to come.

Other Positive Catalysts

Furthermore, as I’ve noted in the past, GE and GE stock should benefit within the next two to three years  from increased electricity consumption driven by the rapid proliferation of electric cars. The coming impact of electric cars on electricity consumption can already be seen in China, which is way ahead of the West when it comes to sales of electric vehicles. The Asian country’s electricity usage jumped 13.3% year-over-year in the first two months of 2018  and 11.4% in May. As electric car sales in the West reach China’s level, electricity demand will jump here as well.

In addition, rapid increases in marijuana production is also likely to spark much greater demand for electricity in some areas.  As these trends take hold,  electric utilities will be forced to build more plants and repair equipment more frequently, boosting Power’s results and lifting GE stock.

GE has said that it will look to sell its stake in oil services company Baker Hughes over the next two to three years. Still, rising tensions between the U.S. and Iran, as well as between Iran and America’s allies, Saudi Arabia and Israel, will probably cause oil prices to rise further in the near to medium term.

General Electric and GE stock should both benefit from that trend as long as GE holds onto its Baker Hughes stake. And GE could still change its mind and decide to retain the shares.

A Reasonable Valuation of GE Stock

Finally, with a forward price-to-earnings ratio of around 12.5 and a price-to-sales ratio of about one, GE stock is trading at quite reasonable levels.

As of this writing, Larry Ramer did not own any shares of GE stock.