How Much Will Renewable Energy Contribute To GE’s Top Line Growth?

by Trefis Team
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General Electric (NASDAQ: GE) has had a fairly difficult past few years. The company saw its revenue grow by just over 5% between 2015-2016. However, its history of controversial accounting and mixed results with acquisitions hit the company hard in 2017. The company saw its revenue fall slightly, while its stock plummeted by 55% in 2017. The negative sentiment continues to hover over the company, as its stock fell below $13 earlier this year (down from nearly $30 in early 2017) before a modest recovery. The company’s turnaround could take some time and will depend on an improving business environment and global growth, and accordingly we expect GE to report mixed results in the next few quarters. The Renewable Energy segment contributes nearly 8% of the company’s overall revenue and was the second fastest growing segment, at over 27% annually between 2015-2017. The strong growth was largely attributable to higher volume of onshore Wind and Hydro orders due to the Alstom acquisition in 2016 and increased international onshore wind orders in 2017.

Based on recent market trends and the near-term outlook provided by the company’s management, we forecast GE to report 2-3% revenue growth in the next two years, from $122 billion in FY 2018 to about $127 billion in FY 2020. Of the estimated $5.3 billion added to net revenues, we estimate that the Renewable Energy segment will contribute over $650 million, or about 12% of the incremental revenues. We have summarized our expectations on our interactive dashboard on GE’s Renewable Energy revenue. If you disagree with our forecasts, you can change the key drivers for the segment to gauge how changes will impact its expected revenue.

Estimates for Key Growth Drivers

The Renewable Energy segment contributes nearly 8% of the company’s overall revenue and has seen its revenue grow by over 27% annually between 2015-2017. GE is one of the leading players in the renewable energy segment and is well positioned to increase its share over time. The Renewable Energy segment holds decent growth potential for GE, as a result of the increasing domestic and international wind and hydro orders. We expect the segment’s tailwinds to provide decent medium-term growth opportunities and drive segment revenue to slightly over $11 billion (by 2020) driven by strong growth in the domestic and international onshore wind and hydro orders, and offshore wind orders.

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