General Electric Co - Stocks

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There are few global companies that have a diverse portfolio and earn the name of conglomerate, and ‘General Electric’ is one such company that operates in Aviation, Renewable energy, Healthcare, Venture Capital, Digital, Additive, Power, Finance, and Transportation business.

General Electric is a US multinational company and ranked 21 in the largest US companies list of Fortune 500 in 2019 based on gross revenue. The company has its headquarter in Boston. General Electric is a very large business organization with business activities in a wide range of segments. Two employees of General Electric have also won the prestigious Nobel Prize award, Irving Langmuir, in 1932 and Ivar Giaever in 1973.

General Electric was formed in 1882 and incorporated in New York. The company is operational in more than 170 countries and has almost 313,000 employees. General Electric emphasis on providing efficient and effective expertise, capital, and infrastructure for a global economy. General Electric is one of the 12 original companies that were first listed on the Dow Jones Industrial Average (DJIA).

History of General Electric

General Electric was founded on April 15, 1892, and has a vibrant business history of 128 years. General Electric traces its roots to Thomas Elva Edison, who was overseeing different electric related companies. Thomas Edison formed ‘Edison Electric Light Company’ in 1978. By 1889, Edison combined all his electric related companies under one name, which was ‘Edison General Electric Company.’

In 1892, Thomson Houston Electric Company merged with Edison’s company to form General Electric, and soon, the new company’s stock started trading on the New York Stock Exchange (NYSE). Edison decided to sell his shares in 1894 and remain just a consultant to General Electric.

The first laboratory of GE is established in the US in 1900. The first acquisition of GE is made in 1903 when the company buys Stanley Electric Manufacturing Company of Pittsfield, Massachusetts, which produces transformers. In 1906, GE introduced its first product range, which was the electric range.

In 1919, General Electric partners with AT&T and Westinghouse to form Radio Corporation of America (RCA) and research and develop radio technology. General Electric exits the utility business in 1924 due to government antitrust laws. General Electric launched a fluorescent lamp in 1938.

The General Electric Capital Corporation was formed in 1943. In 1961, General Electric was found guilty of price-fixing on the electrical equipment and was fined half a million US dollars. GE acquires Utah International for $2.2 billion, which was a formidable copper, coal, uranium, iron, oil and gas producer. General Electric buys RCA that also included National Broadcasting Company (NBC) for a deal worth $6.4 billion. The Employers Reinsurance was also bought for $1.1 billion.

General Electric decided to sell RCA television manufacturing business to Thomson, which was a French company for an exchange of medical diagnostic business. In 1998, the revenue of General Electric crossed $100 billion. In 2000, General Electric acquired Honeywell International Inc. for $45 billion. In 2001, GE bought Heller Financial, which is an established finance company for $5.3 billion.

General Electric has done a number of acquisitions over the years to expand and diversify its business. Some of the notable acquisitions are

• In 2002, Enron Wind
• In 2007, Smiths Aerospace
• In 2009, ScanWind
• In 2010, Dresser Inc.
• In 2011, John Wood Plc’s Well Support Division
• In 2013, Lufkin Industries
• Alstom’s Global Power Division in 2015 which also the largest acquisition of General Electric.

Apart from the acquisitions, General Electric also sold many of its businesses, and in 2015, the company sold its property segment to the Blackstone Group and Wells Fargo. General Electric also sold its finance division and delivered nearly $90 billion to its shareholders and clearly stating a strategic change away from the banking sector.

GE’s share price fell to a low of $7 during the economic crisis but surged to $33 in July 2016. In 2017, General Electric finished a deal worth $30 billion to merge its two units that were GE Oil and Gas and Baker Hughes. However, the merger did little good as the year 2017 was a tough time for the company as the revenue was down 1% at $122 billion, and the EPS was at $1.05.

The share price of GE touched $15 in February 2018, and JPMorgan’s analysts said in April 2018 that GE’s share was still quite costly in the industrial market. The revenue of GE in 2018 was $121 billion.

Current Business and Investment of General Electric

General Electric is a global conglomerate that excels in aerospace, technology, and the digital sector. The company operates in diverse segments, which include Aviation, Power, Renewable Energy, Healthcare, and Capital.

• The Aviation division designs develop and deliver jet engines and turboprops for commercial aircraft. The company also provides maintenance, overhaul, additive machines and materials, engineering, and component repair and replacement services.
• The Power segment provides various technologies, solutions, and services across the energy sector and includes power generation services, generators, and gas and steam turbines.
• The Renewable Energy unit manages the offshore wind turbines, blades for wind turbines, heavy-duty equipment, and products and services related to the hydropower industry.
• The Healthcare division overlooks the provision of services in healthcare that includes medical imaging, patient monitoring, digital solutions, biopharmaceutical manufacturing, drug discovery, and diagnostics.
• The Capital division deals with financing and leasing of aircraft, helicopters, aircraft engines, and underwriting solutions.

Risk and Potential in General Electric Environment

General Electric is a big multinational company with diverse operations in numerous important sectors of the market. The business of the company is spread to all parts of the world. SWOT analysis is a strategic analysis tool that allows a company to benchmark its performance and compare it with industry standards. The SWOT analysis of General Electric is given by

• Strengths

General Electric has a diverse portfolio of businesses that includes Aviation, Power, Renewable Energy, Healthcare, Consumer Electronics, Finance, Oil, and Software. The company gets a steady stream of revenue from multiple sectors, and the risk is considerably reduced. General Electric is considered to be providing one of the most innovative and green workplace environment. The Capital division accounts for 25% of revenue while Aviation, Water, Healthcare, and Oil units account for 10% to 20% each. The company spends an extravagant amount of money on Research and Development (R&D) that enables General Electric to bring new cutting edge technology and innovative products.

• Weaknesses

General Electric has to face quite a few legal proceedings in its business history. The company has to face different kinds of litigation matters in different countries of the world. General Electric has accumulated considerable debt over the years, which becomes a burden and hinders progress. General Electric depends heavily on raw materials from third parties, which can be a problem as any disruption in the supply of raw materials will directly impact the production and halt deliveries.

• Opportunities

General Electric can acquire other business companies to strengthen its portfolio and expand the business reach. There is a growing demand for commercial aircraft that can boost the revenue of the company. General Electric can provide its infrastructure capabilities in emerging economies. The future is the use of alternative and sustainable energy, and General Electric has a well-equipped and an advanced Renewable energy unit that can play its part and help the company reach its goals.

• Threats

General Electric has to comply with numerous governmental and environmental regulations, and there are certain compliance costs that the company has to bear. As the business of General Electric is spread to all parts of the world, any political instability or economic downturn can affect the operations. The economic recessions and pandemic breakout, such as Coronavirus, can influence the financial health of the company. General Electric also has to face competition from rival brands that include 3M, Siemens, Mitsubishi Corporations, and Hitachi.

Stock Analysis of General Electric

General Electric is listed and actively trades on the New York Stock Exchange (NYSE) with the ticker symbol ‘GE.’ The company is listed under the ‘Electronic Technology’ Sector, and the industry is ‘Aerospace and Defense.’ General Electric is also a member of other indices such as the Dow Jones Industrial Average (DJIA), S&P-100 Index, and S&P-500 Index.

The all-time high share price of General Electric was $60.00 on August 28, 2000, and the average price in the last 52 weeks is $8.94.

General Electric’s stock value ended 2019 more than 50% as expected at $11.14, but it was still quite below the all-time high of $60.00, which was in August 2000. General Electric started 2020 on a high note, but the cash flow was considerably affected as Boeing 737 Max plane was grounded worldwide after a series of crashes and technical malfunctioning. The issue is said to be resolved by 2023, which would inject almost $1 billion into the company’s revenue.

The Power unit is seeing a restructuring with the elimination of low-quality backlog projects and efficient cash management. The changes in the Power sector could result in an addition of $2.3 billion to the company by 2023. The share value of GE peaked in mid of February at $13.16, but in later weeks and start of March, the Coronavirus began to spread alarmingly all over the world and disrupted businesses worldwide. The workforce in the Aviation division was cut by 10%.

The outlook for General Electric’s stocks was promising at the start of the year, but there has been an economic downturn all over the world due to the Covid-19 outbreak, which is still not properly controlled. The company sold BioPharma for $20 billion, and proceeds were added to the company’s financials. General Electric expects negative cash flow from $3.5 billion to $4.5 billion in the second quarter of 2020.

At the end of next quarter, General Electric expects 3 cents per share loss in EPS and revenue, reducing 19% to $18.93 billion. The company, however, has achieved $2 billion in cost-cutting, and also lowered the debt by $9.1 billion. The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.