Industrial Power Solutions Company General Electric Company (NYSE: GE) shares are up more than 20% in 2023 as positive sentiment for its restructuring gains steam. General Electric has been selling its businesses for the past several years. Some well-known past spin-offs include the oilfield service provider Baker Hughes Company (NYSE: BKR) and the GE Capital lending business.
Your GE HealthCare Technologies Inc. (NASDAQ: GEHC) spin-off was immediately added to the S&P 500 Index (NYSEARCA: SPY)replacing Vornado Real Estate Trust (NYSE: VNO)which moved over to the S&P MidCap 400 Index. There seems to be more upside as you can set up a weekly cup and handle breakout formation.
Sum of the Parts Strategy
General Electric announced plans to split into three separate companies in November 2021. Since they are not necessarily complementary businesses, CEO Larry Culp believes each will retain higher multiples as separate entities and bring more value to shareholders.
GE shareholders would get additional shares from the spin-offs based on a proportion of their ownership of GE shares. CEO Culp has solid experience in this strategy as a former CEO of the industrial giant. Danaher Co. (NYSE: DHR)as they bought and sold many companies during their tenure there.
The first spin-off of GE HealthCare Technologies was completed and went public on the NASDAQ stock exchange on January 4, 2022, earning 5.5% on the day. General Electric shareholders received one GE HealthCare share for every three General Electric shares they owned.
General Electric still retains a 19.9% stake in GE HealthCare. GE HealthCare has more than four million product installations serving more than two billion patient exams annually.
GE HealthCare Q4 2022 Preliminary Update
On January 10, 2023, GE HealthCare released preliminary results for the fourth quarter of 2022. Revenue increased 7% year-over-year to $4.9 billion. Organic revenue increased 12% year-over-year. Full fiscal year 2022 revenue increased 4% year-over-year to $18.3 billion or 7% year-over-year for organic revenue. He expects full-year adjusted EBIT to be above his outlook.
GE HealthCare CEO Peter Arduni commented: “We delivered strong year-over-year revenue growth in the fourth quarter and full year, reflecting strong customer demand, backlog fulfillment and “Improving prices. While inflation continues to be a factor, we are seeing the supply chain environment continue to improve with demand for our products and services growing in 2023.”
GE HealthCare provided its outlook for the full fiscal year of 2023. It expects organic revenue to grow 5-7% year-over-year. An adjusted EBIT margin of between 15% and 15.5% is expected, representing a 50bp to 100bp improvement over the 2022 pro forma adjusted EBIT margin.
Its aviation division that makes jet engines will be called GE Aerospace. This division has an installed base of 39,400 commercial and 26,200 military aircraft engines. This division also supplies The Boeing Company (NYSE: BA) Y Airbus SE (OTCMKTS: EADSY) with jet engines and will benefit from the recovery of the travel industry.
GE controls nearly 51% of the market share of the wide-body aircraft engine market. The recent agreement with United Airlines Holding Inc. (NYSE: UAL) Committing to buy 100 Boeing 747 MAX aircraft is a big win for GE as it can expect to rake in almost $4 billion in revenue. The modernization of the fleets is an important tailwind for this Company.
Vernova is a combination of the words green and nova. Verde is green and nova is Latin for the word new. This spin-off will consist of GE’s energy, digital and renewable energy financial services. Together with its customers, GE provides a third of the world’s electricity.
The Company will continue to accelerate the development of reliable, affordable and sustainable energy with an installed base of 7,000 gas turbines and 400 GW of renewable energy equipment. These spin-offs are scheduled for early 2024.
weekly cup and handle pattern
GE shares have rallied towards the $80.88 price level where the edge of the cup and handle resides. The pattern began in early 2022. Shares fell to a low of $46.77 in June and rounded a bottom after breaking the minimum market structure trigger (MSL) of $53.22.
Shares exploded higher with the debut of its GEHC spin-off in January. Stocks have now returned to lip level resistance all year, preparing for either a breakout or a slight dip and then a breakout to form a cup and weekly handle pattern.
The weekly 20-period exponential moving average (EMA) at $64.16 broke through the 50-period weekly MA at $62.27. Volume has also picked up as the weekly stochastic attempts to recross the 80 band.
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