GE Wins Plum Deal from South Africa - Analyst Blog

Diversified conglomerate General Electric Company GE recently received a $4.7 billion contract along with Bombardier Inc. BDRBF and two other Chinese companies from South African rail firm Transnet SOC Ltd. The deal is reportedly one of the largest infrastructure contracts awarded by South Africa and is part of an ambitious seven-year plan to overhaul the country's railways, ports and pipelines.

The deal entails the quartet to manufacture 1,064 electronic and diesel locomotives. Except the first 70 trains, the locomotives will be built at Transnet's Pretoria and Durban facilities, with the state-owned rail operator contributing about 16% to the overall program.

South Africa will utilize the new trains to upgrade the general freight fleet that has an average age of 33 years. In addition to boosting a lackluster economy with significant investment in infrastructure, the project is also likely to generate 30,000 jobs for the country.

The contract supports General Electric's recent focus on its industrial business. The company is devoted to reducing credit risks by divesting its Retail Finance business. General Electric has also filed an initial public offering (IPO) of its North American consumer lending unit.

The IPO is expected to be closed by late 2014. Subsequently, GE Capital Retail Finance will operate under the name “Synchrony Financial” and will trade on the New York Stock Exchange under the symbol SYF.

General Electric is one of the largest and the most diversified technology and financial services corporations in the world. With products and services ranging from aircraft engines, power generation, water processing, and security technology to medical imaging, business and consumer financing, media content, and industrial products, the company serves over 100 million customers worldwide. Its segments include Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Home & Business Solutions, and GE Capital.

General Electric currently has a Zacks Rank #3 (Hold). Other stocks in the industry that look promising at current levels include Zacks Rank #1 (Strong Buy) Federal Signal Corp. FSS and Zacks Rank #2 (Buy) 3M Company MMM.