GE Stock Looks Good Ahead of a Likely Budget Deal

With General Electric (NYSE:GE) making multiple, impressive deals in recent weeks, GE stock continues to be a strong buy for long-term investors.

The General Electric (GE) logo on a building
Source: Sundry Photography / Shutterstock.com

Moreover, I continue to expect Congress to pass the bipartisan infrastructure bill, along with significant new support for renewable energy.

The provisions in the infrastructure bill, as well as the increased support for wind energy that Congress is likely to enact should, taken together, should lift GE stock.

And finally, GE also looks poised to benefit from recent increases in geopolitical tensions around the world.

Showing that GE can benefit from the move away from carbon, the conglomerate announced on Sept. 14 that it had sold SF6 free gas-insulated switchgear to Norway’s Elvia.

According to the EPASF6 is the most potent greenhouse gas known to date, and Elvia is one of the biggest distribution system operators in Norway.

On Aug 26, GE’s Grid business, part of its Renewables unit, announced that it had obtained four project wins for its solutions that help utility and transmission network operators deal with issues created by the move towards renewables.

And finally, GE’s Healthcare unit has made a deal to collaborate with Amazon’s (NASDAQ:AMZN) Amazon Web Services on the development of AI and cloud-based imaging solutions, integrated data and clinical and operational insights.

The companies will sell those deliverables to hospitals and healthcare providers.

Developments in Congress and GE Stock

Due in large part to the opposition of Democratic Senator Joe Manchin to progressives’ $3.5 trillion budget proposal, many doubt whether either the budget bill or the bipartisan infrastructure bill will become law.

Yet, after receiving some concessions on the coronavirus relief bill earlier this year, he ultimately voted for the legislation.

I expect a similar scenario to play out with the budget bill. That is, progressives will likely agree to some compromises with Manchin because they will prefer to get 80% of their priorities than 0%.

Manchin will then agree to back the bill. As a result, the budget,  in slightly modified form, and the bipartisan infrastructure bill, should both ultimately pass.

As I’ve written previously, both bills should significantly boost GE’s results.

More specifically, GE’s Power unit should get a big lift from the infrastructure bill, while its wind power business should be helped by the increased funding and incentives for renewable energy included in the budget.

Increased Geopolitical Tensions

In the wake of America’s highly flawed withdrawal from Afghanistan and the Taliban’s takeover of that country, I believe that Iran, al Qaeda and many other Middle Eastern groups that oppose the U.S., Israel, and the Gulf states have been strengthened and emboldened.

Meanwhile, China is becoming more aggressive in the Pacific region. As a result of these situations, I expect global defense spending to climb a great deal in the months and years ahead.

In 2019, GE’s defense business generated over $283 million of revenue.

That doesn’t sound very high, compared to its $95.2 billion of sales that year, but I believe that a large increase in the segment’s revenue could lift GE’s industrial cash flow.

The conglomerate expects its industrial cash flow to come in at $3.5 billion to $5 billion this year.

The Bottom Line on GE Stock

GE continues to make impressive deals, showing that its impressive comeback under CEO Larry Culp is continuing. Meanwhile, the company should benefit from upcoming political developments and from increased orders for its defense business going forward.

Consequently, I believe that GE stock is very attractive in the wake of its recent retreat, and I recommend that longer-term investors buy the shares.

On the date of publication, Larry Ramer held a long position in GE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015.  Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.


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