General Electric Investors Will Have A Happy New Year

General Electric (NYSE:GE) has announced its acquisition of Metem Corporation, a New Jersey based company that provides precision manufacturing technologies to enhance the efficiency of turbine engines. Although the financial details of the acquisition have not been disclosed, the purchase is expected to strengthen GE's position in relation to its competitors in the heavy-duty gas turbine engine segment.

The deal is expected to close in the first quarter of 2016.

What Is Metem's Value For GE?

Metem is a privately-held company that manufactures and supplies precision-machined components to the aerospace and gas turbine industries. Its processes include electrical discharge machining and electrochemical machining of super alloy parts. Its product portfolio includes turbine blades and buckets, turbine shrouds and ring segments, and turbine vanes and nozzles. In addition, the company offers specialized, engineering, and repair services for gas turbine OEMs. Metem has manufacturing facilities in Allentown, Pennsylvania and Szazhalombatta, Hungary.

Metem was founded in 1962. General Electric has had a relationship with the company since the 1970s and is currently Metem's largest client.

GE Returns To Full Strength

GE is in the process of executing a long-term strategy to trim ancillary businesses that drained profitability, such as its financial division, and return to its strengths in the power industry. Acquiring Metem is expected to reduce the cost basis of GEs power unit products and greatly improve efficiencies along its supply chain. GE estimated that it expects the Metem deal to contribute to approximately $1 billion per year in targeted cost savings.

Bolstered By Alstom Acquisition

In November 2015, GE completed its purchase of Alstom SA's power business, which bolstered GE's power division. The acquisition took over 18 months to complete, and GE had to offer considerable concessions to gain approval from regulatory agencies for the company's largest acquisition in its history. The purchase of Alstom represents GE's commitment to the coal- and gas-fueled electricity generating turbine industry.

Further Impetus From Paris

GE may also benefit from the recent Paris Agreement, the climate accord adopted under the United Nations framework on December 12, 2015. While the impact on specific industries may not derive directly from the Paris Agreement, individual countries may institute domestic policies in compliance with the agreement. There are 186 countries which included Intended Nationally Determined Contributions (INDC) to the Paris Agreement.

Along with strengthening its position in manufacturing turbine engines, GE has the following renewable energy programs:

• Wind turbines and integrated battery storage programs in Tehachapi, California
• Wind turbines in Morocco
• A working partnership with Kennedy Renewables Ltd. in Fife, Scotland
• Wind turbines in Barcelona, Spain
• A wind farm in Rehbom, Germany, and one in Poland
• 38 wind turbines in Kenya and a wind farm in India
• The $350 million Boco Rock Wind Farm in Australia
• Specially designed 2.85-103 wind turbines in Japan that can withstand high turbulence, typhoon-class winds and lightening

Comparison With Large Competitors

(Source: financials.morningstar.com/competitors/i...)

While GE may have posted a net loss, compared with large peers, dividend yield is still above its industry average of 2.3, and its med. operating average falls well above the negative industry average.

Conclusion: Buy GE As 2016 Unfolds

Well positioned to soar as investments in Alstom and Metem pan out - both domestically and internationally - GE will likely continue to capitalize on global trends, including new policies from Paris. We suggest buying shares of GE now for both income above its peers group and growth in 2016.