Al Root
The turnaround at General Electric has been remarkable by almost any measurement -- including the $200 billion in stock-market capitalization created since the end of 2018.
This past week GE Aerospace, which is essentially the old GE, and GE Vernova, GE's power generation-related businesses spun off on Apr. 2, reported earnings. Things went well. GE Vernova stock gained 13% this past week, while GE Aerospace shares gained 10%.
The earnings reports generated a flurry of price-target changes. The average analyst price target for GE Vernova shares now sits at about $163, according to FactSet, up roughly $13 from targets set just after the spin.
The same thing has happened to GE Aerospace shares -- in spades. The average analyst price target now sits at about $185, up from about $141 before the GE Vernova spin.
Friday evening, Wells Fargo analyst Matthew Akers raised his GE Aerospace price target to $192 from $165. "GE came in ahead of what were already high expectations in its first quarter a s a standalone company, " wrote the analyst. He rates shares at Buy.
GE Aerospace increased full-year financial guidance. It now expects 2024 operating profit of $6.2 billion to $6.6 billion, up from a March estimate of $6 billion to $6.5 billion.
GE Aerospace, GE Vernova, and GE HealthCare Technologies, which was spun off at the beginning of 2023, are now worth a combined $260 billion. A stark difference from the lows of 2018 when GE's market capitalization slid below $70 billion.
Wall Street, based on price targets for all three companies, value the trio at about $290 billion, up more than $200 billion from late 2018 levels.
It has been a remarkable turnaround. Roughly $100 billion of the value has been created by paying back debt. The GE balance sheet wasn't in very good shape in 2018, leading new CEO Larry Culp to prioritize debt repayment. He paid down some $100 billion which, in some respects, represents a shift of value from debtholders to stockholders.
The rest of the improvement comes down to improving performance across the organization. GE Vernova profit margins are improving. GE Aerospace navigated the Covid-19 pandemic successfully, maintaining its dominance as commercial-jet-engine providers. GE Aerospace engines power roughly three-quarters of all commercial flights that take off.
GE HealthCare reports earnings Tuesday. Wall Street is looking for earnings per share of 91 cents, according to FactSet, up from 85 cents a year ago. Operating-profit margins are expected to edge up to about 14% from about 12%.
Investors hope GE HealthCare's results keep up the positive momentum.
GE Aerospace stock was up 1.5% in early trading at $164.82 while the S&P 500 and Nasdaq Composite were up 0.4% and 0.5%, respectively.
GE Vernova stock was up 0.9% at $154.50, and GE HealthCare was up 1.4% at $87.44.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 29, 2024 10:53 ET (14:53 GMT)
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