GE Inks $5.58B Deals In Vietnam To Augment Regional Ties

General Electric Company (NYSE:GE) recently inked various agreements for power generation, aircraft engines, and services in Vietnam as the country attempts to forge strong business ties with the U.S. amid growing concerns about China’s meteoric rise. The agreements worth $5.8 billion is General Electric’s biggest such deals to date with any Southeast Asian country.

The company signed a memorandum of understanding (MoU) to co-develop two 750-megawatt gas-fueled turbine power plants in the country along with a joint development agreement for an 800-megawatt Phu Cuong Wind Farm in Soc Trang. These deals, worth $2 billion, will support the development of Vietnam’s energy sectors.

In addition, General Electric signed agreements valued at over $3.58 billion for new aircraft engines and maintenance support. These include deals for 20 jet engines for Vietjet Aviation, a low-cost airline of the country. The engines are manufactured by CFM International, a joint venture of General Electric and Safran (PA:SAF) SA. General Electric will also offer a 12-year engine service contract for 215 LEAP-1B engines on 737 MAX aircraft, produced by The Boeing Company (NYSE:BA) and procured by Vietjet.

Just a few days back, the company inked MoUs and deals worth $15 billion with Saudi Arabian companies. These included a MoU with Saudi Aramco, officially the Saudi Arabian Oil Company, for the digital transformation of its operations in order to generate $4 billion in annual productivity improvements.

Despite these initiatives, General Electric has underperformed the Zacks categorized Diversified Operations industry owing to macroeconomic challenges and fluctuations in currency exchanges. It recorded a year-to date loss of 13.4% as against a gain of 1.2% for the industry. Although the company is taking prudent steps to limit its financial exposure by divesting GE Capital assets, it is still susceptible to various market risks. The company’s objectives of simplification and productivity improvement pose operational execution risks as well. For a company as large as General Electric, the additional revenues needed for growth are quite large, posing a challenge in developing businesses on such a vast scale.

General Electric presently has a Zacks Rank #3 (Hold). A couple better-ranked stocks in the industry include 3M Company (NYSE:MMM) and Crane Co. (NYSE:CR) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3M has a long-term earnings growth expectation of 9.7%. It topped estimates thrice in the trailing four quarters with an average positive earnings surprise of 1.3%.

Crane has long-term earnings growth expectation of 10.1%. It surpassed estimates in each of the trailing four quarters with an average positive earnings surprise of 8.4%.

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