General Electric, now GE Aerospace (NYSE: $GE), the most valuable publicly traded company at the turn of the century, has completed its journey, splitting into three entities on Tuesday, April 2, 2024.
General Electric’s Split
The conglomerate, formed 132 years ago, was an icon in the American business world. A year ago, the company began the split into three entities.
The first split was the spinoff of GE HealthCare (NASDAQ: $GEHC), which was concluded on January 4, 2023. At the time of the split, holders of GE common stock received one share of GEHC for every three GE shares they held in a tax-free spinoff. GE retained around 19.9 percent of GEHC shares at the time of spinoff.
On April 2, 2024, GE announced the completion of the GE Vernova (NYSE: $GEV) spinoff, with the subsequent creation of a new entity called GE Aerospace (NYSE: $GE). Under the spinoff terms, holders of GE common stock received one share of GEV for every GE common stock they owned in a tax-efficient manner for US holders.
Commenting on the completion of the spinoff, GE Aerospace CEO and Chari, Lawrence Culp Jr., stated, “With the successful launch of three independent, public companies now complete – today marks a historic final step in the multi-year transformation of GE. I am tremendously proud of our team, their resilience, and their dedication to achieving this defining moment.”
With the new entities now independently trading on the NASDAQ and NYSE, GE Vernova will focus on energy solutions, GE Aerospace will focus on aviation solutions, and GE HealthCare will focus on medical technology.
GE Aerospace – A Leader in Aviation Manufacturing
GE Aerospace has around 44,000 commercial engines, and around 26,000 defense engines globally and is a leader in the propulsion, services, and systems industry. In 2023, it generated around 32 billion in revenue, with 70% coming from services in the lucrative engine aftermarket sector.
GE Aerospace Outlook
In the spinoff announcement, GE Aerospace retaliated its guidance for 2024 issued in January. It expects adjusted revenue to grow in the low double digits or more and an operating profit of $6 billion to $6.5 billion. Additionally, it expects a free cash flow of over $5 billion at the end of 2024.
In its March 7, 2024 investor day conference, GE forecast deliveries would grow around 20% to 25% in 2024 and continue rising in 2025 and 2026.
It also expects over $10 billion in operating profit in 2028, with a strong cash flow to net income ratio of around 100%. Additionally, GE Aerospace expects to return 70% to 75% of free cash flow to shareholders via dividends and share buybacks.
GE Aerospace Share Performance
After the stock split, GE shares debuted with a price of $140.53 per share on April 2, 2024. At the close of business, the shares were down 2.42% at $136.47. ON Wednesday, April 3, 2024, the stock was up 5.20%, trading at $143.82 per share as of 11:14 AM EDT.
The shares are trading at reasonable multiples, with a forward P/E ratio of 29.07, a Price to Sales ratio of 2.21, and an Enterprise Value to Revenue ratio of 2.20.
Analysts’ Outlook on GE Shares
15 Wall Street Analysts have an overall strong buy rating for GE stock. They forecast a wide range for the stock in the next 12 months, with a high of $200 and a low of $150. Their average price forecast is $176.71, a 29.49% upside based on the last closing price.
Is GE Stock a Buy?
Currently, GE Aerospace’s profitability is depressed as it ramps up deliveries in 2024 and beyond. According to its estimates, the company expects deliveries to increase by up to 25% in 2024. However, in a few years, as those parts start to require maintenance and servicing, GE will see an increase in profit, with the company estimating around $10 billion in operating profit by 2028.
With its generous shareholder return plan of up to 75% of all cash flow, GE stock is a lucrative long-term investment. Consequently, analysts’ strong buy rating accurately represents its medium and long-term performance.
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