General Electric is undertaking an epic transformation under the leadership of CEO Larry Culp—the first outside chief the company has hired in its history. The transformation will culminate in the breakup of the American industrial icon.
GE (ticker: GE) is splitting in three. Monday, GE revealed the names of the coming firms. The “GE” is surviving in all three names.
The healthcare company, which makes scanners and ultrasounds for hospitals, will become GE HealthCare trading under the stock symbol “GEHC.”
That business is due to be spun out first in 2023. GE’s healthcare unit has generated almost $18 billion in sales over the past 12 months and about $2.8 billion in operating income.
Healthcare profit margins are down as the company has dealt with supply-chain shortages as well as hiccups related to Covid. Investors can expect some rebound down the road.
After GE HealthCare, GE’s aviation and energy businesses will separate in 2024. The aviation business will become GE Aerospace. The power and renewables business will become GE Vernova. That name comes a combination of verde and nova, which are respectively “green” in Spanish and “new” in Latin.
GE’s aviation business is a world leader. It generated about $22 billion in sales and $3.1 billion in operating profit over the past 12 months. Profits have been hit by Covid, which has hurt demand for air travel. Aviation generated almost $7 billion in operating profit in 2019—before the pandemic hit the world.
Vernova is the most challenged of the GE businesses. The business units that will become Vernova generated roughly $32 billion over the past 12 months and lost a little bit of money on the operating profit line of the income statement. Wind players Siemens Gamesa Renewable Energy (SGRE.Germany), Vestas Wind Systems (VWS.Denmark), and GE have all lost money over the past 12 months.
Wind turbines are ordered years in advance, and recent inflation is part of the reason all three are struggling, according to Bank of America analyst Andrew Obin.
Coming into Monday trading, GE stock is down about 33% year to date. Industrial stocks in the S&P 500 have fallen about 18% so far this year on average.
Write to Al Root at [email protected]