GE Signs New Deals With Saudi Arabia To Strengthen Ties

Despite the ongoing rivalry between Saudi Arabia and American shale oil companies, Saudi Aramco recently signed a deal with the U.S. worth approximately $50 billion, during President Trump’s visit to the country. This deal will help the countries boost their bilateral business ties.

Following the deal, General Electric Company (NYSE:GE) inked memorandums of understanding (MoU) and deals worth $15 billion with Saudi companies. These deals included a MoU with Aramco for the digital transformation of Aramco’s operations in order to generate $4 billion in annual productivity improvements.

General Electric recently entered into a joint venture with Dussur to manufacture gas turbines in Saudi Arabia by the end of the year. The deal is worth 1 billion riyals ($267 million).

The manufacturing of General Electric's H-Class turbines in Saudi Arabia is expected to start before the end of the year, while the first turbine is expected to be completed in 2018.

This deal aims to develop the industrial sectors in Saudi Arabia as part of the government's plan to create jobs and diversify the oil-dependent economy.

The joint venture followed a MoU signed between both the companies last year, per which, the deal is expected to draw nearly 3.75 billion riyals of investment by both the companies in 2017. According to the deal, General Electrics has stake of 45% while Dussur has 55% stake.

General Electric has underperformed the Zacks categorized Diversified Operations industry in the last three months owing to macroeconomic challenges and fluctuations in currency exchanges with a loss of 8.25% compared with a decline of 0.06% for the latter. However, this deal is the outcome of General Electric’s aim to expand its foothold in Saudi Arabia as well as help the country generate more employment opportunities for its people. This will, in turn, enable General Electric boost its revenues in the region going forward.

General Electric currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include 3M Company (NYSE:MMM) , Bunzl (LON:BNZL) plc (OTC:BZLFY) and Crane Co. (NYSE:CR) , each 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 has a positive earnings surprise history with an average of 1.3% in the trailing four quarters, beating estimates thrice.

Bunzl has a long-term earnings growth expectation of 3.2%.

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

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