Should You Invest In Ge Now?

General Electric (GE) is a global industrial company with a presence in the power, renewable energy, aviation, healthcare, and financial services industries. GE has been in business for over 130 years and has two primary parts to its company: its aerospace and energy divisions. The company has valuable assets, including its investment portfolio, and has been profitable for decades.

GE's stock has had a volatile performance in recent years, with investors losing more than 50% of their stock value in a five-year period. However, the company has taken steps to improve its financial health, such as reducing its debt and selling off certain businesses.

When considering whether to invest in GE, it is essential to assess the company's business operations, financials, and fit within your investment style and portfolio needs. GE's major business operations in aerospace and energy provide stability and profitability, with the company generating revenue from equipment sales and ongoing services. The company also benefits from a large backlog of equipment orders and long-term service contracts, providing good revenue visibility.

Additionally, GE's management has made shareholder-friendly moves, such as share repurchases, dividend payments, and debt reduction. The company has also approved a plan to split into three separate companies focused on aviation, healthcare, and energy by 2024.

Before investing, it is crucial to conduct thorough research and due diligence, considering factors such as budget, risk tolerance, and investment goals.

GE's debt load

GEs debt load has been a significant concern for investors, with the company's total debt reaching $135 billion in 2017. While GE has reduced this number since then, it still has over $115 billion in outstanding debt as of 2019, far exceeding its yearly earnings. This heavy debt load has weighed on the company's credit ratings and market performance, with GE's bonds crashing by around 14% in 2018.

The debt issue is partly due to a series of major deals that turned into nightmares, as well as years of horrible deal-making and overly aggressive rewards for shareholders under former CEO Jeff Immelt. One of its worst deals was a $9.5 billion acquisition of Alstom's power business, which backfired as fossil fuels fell out of favor. GE also compounded its financial problems by returning vast amounts of cash to shareholders through buybacks and dividends instead of paying down debt.

As a result of its debt load, GE has been forced to scramble for cash by selling businesses, a strategy that will eat away at future profits. The huge debt has also led to a decline in GE's stock price, with shares tumbling 18% in 2019 after plunging 45% in 2018. The company's debt-to-earnings ratio has surged from 1.5 in 2013 to 3.7, indicating that GE is more reliant on debt compared to its rivals.

In response to its debt challenges, GE has taken several measures to improve its financial position. Under new CEO Larry Culp, the company has focused on cutting debt and selling assets. Culp has expressed a "sense of urgency" in addressing the debt issue and has already reduced GE's debt load by selling off many company assets. Additionally, GE has slashed its quarterly dividend and plans to sell $20 billion worth of assets to pay down debt. The goal is to lower the debt-to-earnings ratio to 2.5 and raise its cash balance.

Despite these efforts, nervousness around GE's debt has been growing, with credit ratings agencies downgrading the company's credit rating multiple times. In 2019, S&P Global Ratings downgraded GE's credit rating to BBB+, just three steps above junk status. This downgrade, along with similar actions by Moody's and Fitch, triggered a tumble in the price of the company's bonds.

In summary, GE's debt load remains a significant concern for investors, and the company has implemented various strategies to reduce it. While there have been some positive steps, the market remains divided on GE's prospects, with analysts debating whether the company can overcome its debt challenges and return to profitability.

GE's healthcare business

GE Healthcare, a medical device company, is a business segment of General Electric that brings in $17 billion in revenue and has strong free cash flow conversion. While it is not the most profitable business segment, it is growing at a stable rate. GE Healthcare is focused on pushing the boundaries of technology to create game-changing solutions in healthcare. The company champions impossible ideas and incredible innovations to be at the forefront of next-generation healthcare solutions.

GE Healthcare has a presence in 80 countries across the world and is committed to creating a culture of compassion and empathy. The company believes that the diversity and differences of its colleagues are key to its success, and it strives to nurture and encourage its people to bring their collaborative and authentic selves to work.

GE Healthcare's mission is to make healthcare better for the future well-being of everyone on the planet. The company wants to be a force for positive change in healthcare and to make life-enhancing differences in people's lives.

GE's aviation business

GE Aerospace, formerly known as GE Aviation, is a world-leading provider of jet and turboprop engines, as well as integrated systems for commercial, military, business, and general aviation aircraft. It is the legal successor to the original General Electric Company, founded in 1892, and is headquartered in Evendale, Ohio, outside Cincinnati.

GE Aerospace manufactures engines under its name and partners with other manufacturers to produce engines. CFM International, a 50/50 joint venture with the French company Safran Aircraft Engines, is GE's most successful partnership. CFM International is the world's leading supplier of aircraft engines, holding 39% of the world's commercial aircraft engine market share, while GE Aerospace holds a further 14%.

GE Aerospace's commercial engines are designed to be 40% more fuel-efficient compared to engines made in the 1970s. The company's research and development spending in 2023 was $2.3 billion, including customer and partner funding. With next-generation technologies, GE aims to further improve fuel efficiency and reduce CO2 emissions by 20% compared to today's most efficient engines.

GE Aerospace's aviation business has a strong presence in the military and commercial sectors. It produces engines that power commercial airplanes, military planes, and helicopters. The company also develops aerospace systems and equipment, including platform computing systems, power generation and distribution products, mechanical actuation products, landing gear, and various engine components.

GE Aerospace serves commercial and military aircraft, including executive and regional aircraft, fighters, bombers, and surveillance aircraft. The company has business operations across Europe, Asia, the Americas, and the Middle East and Africa.

In 2022, GE Aviation changed its name to GE Aerospace to reflect the company's intention to broaden its focus beyond aircraft engines. In April 2024, GE Aerospace became the only business line of the former General Electric conglomerate after it completed the divestiture of GE HealthCare and GE Vernova (its energy businesses division).

GE's stock price history

GEs Stock Price History

General Electric (GE) has been in business for over 130 years, with operations primarily in energy and aerospace. The company has two main business segments: aerospace and energy, the latter of which includes renewable energy operations. In 2024, the company intends to split into two publicly traded stocks: GE Aerospace and GE Vernova.

GE's stock price has fluctuated over the years, with a 52-week range of $44.54 to $105.72 as of July 2023. The stock underwent an 8-for-1 reverse stock split in 2021, which reduced the outstanding share count and boosted the stock price. As of November 2023, GE's stock price was up about 45% from where it traded immediately after the reverse stock split.

In December 2019, GE's stock price was up almost 50% year-to-date, but it was still far from where it had been just a few years prior. At that time, GE was considered a moderate buy on Wall Street, with potential upside of 4%.

One of the biggest issues for GE has been its heavy debt load, which totalled more than $115 billion in 2019, far exceeding the company's yearly earnings. However, under the leadership of CEO Larry Culp, GE has been working to pay down its debt by selling off assets and improving its operations.

GE's most valuable assets include its aviation segment, which produces engines for commercial airplanes, military planes, and helicopters. This segment alone generated $55 billion in new sales at the 2019 Paris Air Show. GE's healthcare business is also growing, with the company selling its biopharma business to Danaher for $21 billion.

Overall, GE's stock price history has been marked by efforts to reduce debt, improve operations, and focus on key business segments such as aviation and healthcare. The company's upcoming split into two publicly traded stocks may also impact its stock price in the future.

GE's subsidiaries and spinoffs

GE has a long history of innovation and industry leadership, but it has also been plagued by high levels of debt. To simplify its business structure and improve its financial position, GE has undertaken a series of spinoffs and divestments in recent years.

In late 2021, GE announced its intention to break up its operations into three independent, industry-leading, investment-grade public companies focused on aviation, healthcare, and energy. This three-way split was completed in April 2024, with the formation of GE Aerospace, GE Vernova, and GE Healthcare.

GE Aerospace

GE Aerospace, which continues to trade under the ticker "GE", is focused on aviation operations. It designs and manufactures commercial and military aircraft engines, engine components, and electric power and mechanical aircraft systems. The unit also provides aftermarket services to support its products.

GE Vernova

GE Vernova, trading under the ticker "GEV", is an energy company formed from the combination of GE Power, GE Renewable Energy, and GE Digital. GE Power played a pivotal role in developing technology to generate and distribute energy, introducing the first commercial nuclear reactor in 1957. GE Renewable Energy had over 400 gigawatts of installed capacity worldwide and was America's largest producer of wind turbines. GE Digital provided software to help companies analyze and optimize their operations.

GE Healthcare

GE Healthcare, trading under the ticker "GEHC", is a global leader in precision health, an approach that accounts for patients' unique genetic, behavioural, and environmental characteristics. The company specializes in medical imaging, patient monitoring, diagnostics, and drug discovery, operating in more than 160 countries and employing about 51,000 people worldwide.

Other Spinoffs and Divestments

Over the years, GE has also sold or spun off several other businesses. GE Plastics was sold to Saudi Arabia in 2007, GE Transportation was sold to Wabtec, and GE Appliances was sold to Haier. Most of its financial operations were sold to Wells Fargo and other banks, and its last stake in NBCUniversal was sold to Comcast in 2014.

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