Where Is GE's Growth Coming From?
In today's world, most companies span several regions and sell across the world. As Foolish colleague Morgan Housel notes, 10 years ago, less than a third of S&P 500 revenue came from outside the United States. Today, more than half of the S&P 500's growth comes from overseas. And that number is growing.
The truth is, investors regularly underestimate how much demand comes from abroad. More importantly, for large, multinational corporations that have already established a presence in their home markets, much of their future growth comes from foreign markets.
With that in mind, today we're looking at General Electric (NYS: GE) . We'll examine not only where its sales and earnings come from, but also how its sales abroad have changed over time.
Where GE's sales were five years ago
Five years ago, General Electric produced the majority of sales from the United States, with Europe a distant second as its largest market.
Where GE's sales are today
Today, America is still GE's largest market, but its influence is shrinking. While Europe held firm at 21% of sales, GE's proportion of sales to the United States slunk down from 55% to 47%.
On a total-sales basis, U.S. sales dropped from $75.7 billion to $70.5 billion over the past five years. However, despite domestic slowness, the company still managed to grow companywide sales by almost 10% over the past half-decade. So what picked up the slack? Europe was an explosive grower between 2005 and 2008; however, sales to the continent have dropped off by an astonishing 27% since that time.
That leaves developing countries as a key growth driver. Although sales are still below their 2008 peak in the Pacific Basin, Latin America, and the Middle East and African markets, they all held up much better than GE's sales to the U.S. and Europe did, over not only the past half-decade, but also the past two years. Like many of its Dow component peers, GE will have to tap into heady emerging-market growth in the years ahead if it wants to continue its march back to sales levels not seen since the financial crisis capsized GE Capital and left the company reeling.
One last point to check is how GE's footprint compares with those of some of its peers.
Geography With Most Sales
Percent of Sales
|General Electric||United States||47%|
|Cree (NAS: CREE)||China||40%|
|United Technologies (NYS: UTX)||United States||53%|
|Honeywell (NYS: HON)||United States||59%|
Source: Capital IQ, a division of Standard & Poor's.
Relative to its peers, General Electric appears to be well diversified. Both Honeywell and United Technologies are slightly more levered to the domestic U.S. market, thanks in part to their heavier exposure to military spending. Cree has higher exposure to customers in China, but its LED-focus is only a small part of GE's overall revenues.
If you're looking to stay updated on GE, or any other companies, make sure to add them to our free watchlist service, My Watchlist. It's free, and it helps you constantly stay updated on news and analysis from your favorite companies.
- Add General Electric to My Watchlist.
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- Add Honeywell to My Watchlist.
At the time this article was published Eric Bleekerowns shares of no companies listed above. You canfollow him on Twitterto see all of his technology and market commentary.Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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