General Electric (GE) will split up into three public companies, after a long and costly restructuring aimed at setting the American industrial icon back on the rails. GE stock briefly took a buy point.
XGE plans to spin off its health care business in 2023. It will separate and combine its power and renewable energy businesses in early 2024.
Following those spinoffs, GE will emerge as an aviation pure-play company.
In Q3, GE's aviation business grew sales 10% vs. a year earlier, while health care was down 5%, renewable energy was down 7% and power was flat.
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"By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility," GE Chairman and CEO Larry Culp said in a release Tuesday. Following the spinoffs, he will lead the new GE aviation-focused company. John Slattery, formerly of Embraer (ESJ), will continue as CEO of GE Aviation.
GE expects one-time separation and transition costs of about $2 billion and tax costs of less than $500 million. It now expects to achieve high-single-digit margins for free cash flow in 2023.
GE Stock
Shares of General Electric rose 2.7% to 111.30 in Tuesday's stock market trading, paring early gains to 116.17. GE stock briefly seized a 115.30 buy point from a saucer-shaped base, according to MarketSmith chart analysis. The relative strength line for GE stock is lackluster.
Raytheon Technologies (RTX) edged up 0.3% to 90.05. Raytheon Tech emerged in 2020 from the merger of Raytheon Co. and United Technologies, after the latter similarly spun off its Carrier and Otis businesses to emerge as an aviation pure play.
In Tuesday's release, General Electric added that the transactions would enable "the next step in GE's transformation." In recent years, a restructuring GE shed several assets from a sprawling portfolio of businesses, slashed billions of dollars in debt, and mitigated legal and financial risks.
The moves were largely praised on Wall Street for allowing a simpler and stronger GE to emerge.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
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