General Electric Company (NYSE:GE): The General Electric new business plan of becoming a high-tech industrial company is receiving positive responses from investors and market pundits.
Its shares jumped more than 8% in the last two sessions after losing almost 50% of its value in the previous twelve months. Oppenheimer has upgraded its shares ratings from ‘Underperform’ to ‘Perform’, saying that its portfolio plan for generating sustainable growth and reducing liabilities will improve General Electric’s share price performance in the days to come.
General Electric New Business Plan
General Electric is looking to sell all of its business spinoffs, excluding Aviation, Power, and Renewable Energy units. GE has announced that it is selling its transportation unit and Baker Hughes stakes, along with the spinoff of its healthcare business. The company is looking to use proceeds of $20 billion from asset sales to lower its debt position.
Portfolio Repositioning
The company is looking to generate sustainable growth from aviation, power, and renewable energy units. Its aviation unit ended FY2018 with a revenue of $27 billion and a massive backlog of $200 billion. Revenues from aviation businesses rose 7% in the first quarter while its order backlog grew 13% from the same period last year. The company expects to generate high mid-single to double-digit growth from its aviation business unit.
The power unit, which is its largest revenue-generating unit, has ended fiscal 2017 with $98 billion.
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Its renewable energy unit has been generating double-digit growth for the company over the last couple of quarters. General Electric believes they can generate sustainable growth from this business due to increasing demand for renewable energy products. The order backlog for its renewable energy unit grew 15% year over year in the first quarter.
Strengthening Balance Sheet
General Electric management is working on different strategies inclusive of asset sales, dividend cuts, and enhancing its internal cash generation for improving its liquidity position. On top of its strategy to reduce debt by $25 billion in the next two years, the company plans to strengthen its industrial leverage 2.5x by 2020 from 3.5x at present.
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