Key Takeaways
- GE Aerospace, the inheritor of the “GE” ticker, closed at its highest level since early 2008 after posting strong results and boosting guidance.
- The results underscore a remarkable turnaround for the 132-year-old behemoth after a precipitous fall from grace.
- Earlier this year, GE completed a split into three separate companies focused on aviation, energy, and healthcare.
Shares of GE Aerospace (GE) on Tuesday hit their highest level since early 2008 as second-quarter results showed the company’s years-long turnaround plan was bearing fruit.
GE Aerospace, the inheritor of the “GE” ticker, raised its full-year earnings guidance on Tuesday after reporting that revenue, orders, and profit all exceeded expectations in the second quarter. The beat-and-raise sent its shares nearly 6% higher, bringing their year-to-date gain to more than 70%
The results underscore a remarkable turnaround for the 132-year-old behemoth after a precipitous fall from grace.
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The Rise and Fall of GE
General Electric had its roots in the business interests of Thomas Edison and was one of the 12 original components of the Dow Jones Industrial Average. Throughout the 20th century, GE established itself as a technology and manufacturing pioneer. It made lightbulbs, radios, refrigerators, and other home appliances; it owned radio and television stations; it built plane engines and power stations.
Then, in the 1980s, legendary CEO Jack Welch went on a shopping spree, buying NBC and financial firms, a decision that proved nearly fatal during the 2008 financial crisis. Welch’s successor, Jeff Immelt, carried on Welch’s tradition, pursuing ill-conceived acquisitions, including a $9 billion investment in coal-fueled turbines in 2015. The company, bloated and hobbled by a mountain of debt, halved its dividend in 2017.
As its troubles piled up, GE’s share price slumped. The stock was dropped from the blue-chip Dow Jones Industrial Average in June 2018.
From Turnaround to Spin-Off
Enter Larry Culp, the former CEO of medical device giant Danaher (DHR) who had joined GE’s board in April 2018. Culp replaced John Flannery, a longtime GE employee and the former leader of its healthcare unit, in October, about a year after Flannery’s appointment.
Culp swiftly moved to shore up the ailing conglomerate’s finances. GE in December 2018 slashed its quarterly dividend to 1 cent from 12 cents. The company struck deals to sell its BioPharma and transportation segments in early 2019, and that year also offloaded much of its majority stake in oilfield services company Baker Hughes (BKR). By the end of 2020, GE had reduced its total debt to about $75 billion from more than $108 billion in 2018.
Then, in November 2021, GE announced that it would split into three separate companies focused on aviation, energy, and healthcare. The first spin-off came in January 2023 when the healthcare business began trading as GE HealthCare (GEHC). The split was completed in April 2024 when GE’s renewable energy and power units were consolidated under the name GE Vernova (GEV), leaving GE Aerospace to trade under the GE symbol.
The Spin-Off Pay-Off
The spin-offs have been a resounding success on Wall Street. GE Aerospace stock has risen more than 25% since April’s spin-off, while GE Vernova shares have risen more than 20%. GE HealthCare is up 37% since its debut.
Their cumulative market capitalization has risen to nearly $270 billion, nearly three times the conglomerate’s value in late 2022.
GE Vernova is slated to report earnings on Wednesday. GE HealthCare will report the following Wednesday.