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GE Capital began as a central financial corporation in 1932 to help consumers finance the acquisition of General Electric aircraft (NYSE: GE). Funding for refrigerators, washers and dryers would probably have been cutting edge at the time, but at the time they had no concept of what was going to happen and what GE’s actions would look like.
Under the leadership of CHIEF Executives Jack Welch and Jeff Immelt, GE Capital’s assets amounted to $160 billion in 1995, $332 billion in 2000 and $637 billion in 2008. In 2014, GE Capital became the seventh largest bank holding company in the United States. Immelt began to dismantle this empire.
The Announcement in March 2021 that GE selling/merging its giant advertising aircraft lease business to its competitor AerCap (NYSE: AER) would possibly have written the ultimate bankruptcy of GE Capital. After closing, GE’s monetary arm will have only $65 billion in assets ($17 billion if it excludes insurance settlement assets) and will be consolidated into GE’s global advertising monetary statements.
What will remain will be an almost pure commercial company, able to grow, which has long eluded GE. The “new” company will focus on 4 different segments: energy, renewable energy, aviation and health.
Composed basically of giant commercial gas, steam or nuclear turbines, it is one of GE’s most powerful expansion engines for decades. In recent years, this segment has been affected by increased renewable energy production and declining coal activity.
Although the expansion is more or less robust this year and next, the long-term history of power generation in emerging markets is still expected to come into play. decent point of recurring income in the future.
This segment is driven through large onshore wind turbines, but also includes hydroelectric products, solar products and services, as well as power grid offerings. long-term renewable energy growth.
GE Aviation aircraft engines, systems and avionics for advertising and army aircraft. The engine market is necessarily an oligopoly between GE, Rolls-Royce and Pratt
This segment suffered in 2020, as aircraft brands and airlines experienced a significant disruption of advertising due to the lack of results from the Covid-19 pandemic. The company expects a recovery from the first part of 2021, as well as further expansion into the army market. In the Energy segment, aviation has a really large percentage of service revenue similar to each sale. Last year, service revenue accounted for 60% of the segment, while actual equipment sales were 40%.
If there was a crown jewel in GE’s portfolio, it would be physical care. Known primarily from MRI and CT equipment, they also supply ultrasound equipment, enthusiasts, and a variety of PC physical care offerings.
Legendary would possibly be a strong word for Larry Culp, who took over as CEO in September 2018, but for Danaher shareholders (NYSE: DHR), this would possibly not be an exaggeration. the inventory grew by more than 500% and made the company a diversified and reputable manufacturer of medical, advertising and advertising products.
Culp was responsible not only for addressing ge’s problematic facets, but also for delivering balance sheet and, more importantly, growth.
As GE necessarily becomes a natural trading company again, the attitude of investors is expected to change. Consistent earnings with a consistent percentage are expected to increase to one hundred percent in 2022 and 50% in 2023, analyst estimates.
It’s no longer a story of change, it’s no longer a price inventory, but if Culp can draw the magic he did on Danaher, then it becomes a genuine expansion inventory. Who knows, one day, GE’s inventory will even attract Reddit’s attention. Crowd.
Tom Kerr, CFA is an investment manager and an experienced company that has worked in the investment and securities industry since 1994.
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