This week we hosted Global Power management for a day of investor meetings. Management remains optimistic about being able to reach its goal of doubling revenue and

This week we hosted Global Power management for a day of investor meetings. Management remains optimistic about being able to reach its goal of doubling revenue and operating margin by 2017-2018 (the goal was set in December 2012 and ultimately yielded EPS near $3.00), but with a faster-than-expected ramp-up in acquisition activity in 2013, internal reorganization is progressing slower than we had expected.

Nonetheless, since the last round of acquisitions, we believe the company is making progress with internal reorganization and optimization efforts, and we are encouraged that these are translating into orders (such as the recent Entergy [ETR $74.86] award, which we discuss in more detail below) and believe these initiatives should begin to benefit profitability later in 2014 and in 2015.

In the near term, we expect Global Power to remain focused on internal optimization and organic growth investments to expand its commercial strategy and operational capacity, while over the long term acquisitions remain a critical piece of the company s growth strategy. Overall, we are encouraged by the actions Global Power is taking, which we expect to improve the quality of its earnings and make progress toward its longer-term growth objectives; however, we believe there needs to be more tangible evidence of margin improvement before shares more fully reflect the company s longer-term earnings potential.

Near-term focus on improving organization from within Acquisitions remain a critical piece of growth strategy Products and energy services are best organic growth opportunities Nuclear services market remains tight, but strategic initiatives limit downside Internal improvements have taken longer than expected but are beginning to pay off. Since its most recent round of acquisitions (Hetsco and IBI Power in 2013), management has focused on reorganizing and optimizing the company s existing product and service portfolio.

With a number of new operational leaders put in place (either new to the company or new to their role) in 2013, we believe the company is beginning to improve its cost structure and operational capabilities as well as enhance its commercial strategies. Although these internal initiatives are taking longer than expected to materialize, the company believes that the benefits should be more apparent in reported results later in 2014 and in 2015. Details related to margin expansion opportunities from cost savings were limited; however, we sense that there will be increasing focus on simplifying systems throughout the company and ongoing lean implementation (every Global Power facility now has productivity targets) at acquired and legacy business sites (the company noted that it identified roughly $1.5 million of savings at a legacy Braden auxiliary gas turbine equipment facility through lean initiatives and has produced an extra control house per week at another facility).