General Electric (NYSE:GE): GE’s shares have tumbled down big time last week and briefly fell below $12, a decline never seen by the company since recession. The company’s shares have lost more than 60% since the start of 2017, as its GE Capital unit and power business take the responsibility.
In spite of all this negativity, the company’s two main profit machines, aviation and healthcare units, continue to generate steady revenue and earnings growth. GE’s management is now planning to slim down the company’s portfolio by limiting it only to a few core segments. Once investors overcome their insecurities regarding the company’s future and start investing, it is almost certain that they will see 100% returns on their investments over the next few years.
GE’s slim down process
GE is a storied conglomerate which operates in eight separate sectors namely: renewable energy, healthcare, oil and gas, aviation, power, capital, transportation and lightning. The company’s management as a part of their slim down plan wants to sell or spin off all other segments except for the aviation, smaller GE capital, power and renewable energy.
As per the plan, GE announced in May that it is merging its transportation unit with Wabtec (NYSE:WAB) and then in June, it announced that its healthcare segment will soon become an independent company and will come out of its stake in Baker Hughes, a GE Company (NYSE:BHGE) in the next few years. It is also on the lookout for selling its lightning division.
On the other hand, its power segment is being sold in pieces. Last September, GE came to an agreement to sell its industrial solutions unit to ABB for $2.6 billion and closed the deal this June. Same month the company decided to sell its distributed power business to a private firm for $3.25 billion. Now it is looking to sell its power conversion unit which might be $1.5 billion worth.
Value to investors: As a part of its slim down plan, GE is planning to transfer the shares of its spinoff’s to its shareholders. As a result of the company’s Transportation’s merger deal with Wabtec, GE shareholders will receive a 40.2% stake in the combined company. Based on the recent Wabtec stock price, that would be worth roughly $8.5 billion, or nearly $1 per share of GE stock.
The company is also planning to transfer its 80% stake in the healthcare to the shareholders and it could be worth $4 per share. Finally, GE could potentially look to exit the oil and gas business by distributing its 62.5% stake in Baker Hughes to the shareholders.
Looking at all the above returns the company is willing to share with its investors; buying the stock now at such a cheap price could be the best bargain ever. And if you are patient to wait long enough, GE is capable of doubling investments over the next few years.