General Electric (GE) recently completed the spin-off of its power and renewables energy businesses, creating a new standalone energy company called GE Vernova. This restructuring is part of GE’s broader plans to focus on specific sectors, with GE Aerospace now dedicated to aviation technology products. The company first announced its restructuring in 2021, with GE Healthcare Technologies being spun off last year. The market response has been largely positive, with GE stock rallying over 75% in the last twelve months.
Over a three-year period, GE stock has seen strong gains of 110%, outperforming the S&P 500’s increase of about 40%. However, the stock’s performance has not been consistent, with returns of 10% in 2021, -11% in 2022, and 95% in 2023. In comparison, the S&P 500 saw returns of 27% in 2021, -19% in 2022, and 24% in 2023, indicating that GE underperformed the index in 2021. Consistently beating the S&P 500 has been a challenge for many individual stocks in recent years, including other heavyweights in the Industrials sector.
In the current uncertain macroeconomic environment with high oil prices and elevated interest rates, there are concerns about how GE will perform moving forward. The stock is currently priced around $135, and its performance could be influenced by any financial updates or guidance provided by the company, particularly for its Aerospace business. GE’s Aerospace revenue has been on the rise, reaching $33.4 billion in 2023, with expectations for further growth in 2024. However, there are uncertainties surrounding the ongoing Boeing issue and its potential impact on GE’s business.
While GE stock appears to be appropriately priced, it is important to consider how the company’s peers are performing on key metrics. Peer comparisons can provide valuable insights for investors looking to make informed investment decisions. General Electric’s Aerospace business has seen steady growth, supported by robust demand from aftermarket services amid strong travel demand and a shortage of new airplanes. It remains to be seen how GE will navigate the challenges and opportunities in the aerospace and energy sectors in the coming months.
Overall, the spin-off of GE’s power and renewables energy businesses is a strategic move that aligns with the company’s focus on specific sectors. Investors will be closely monitoring GE’s performance in the Aerospace and Energy segments, as well as keeping an eye on industry trends and macroeconomic factors that could impact the company’s stock price. As with any investment, conducting thorough research and staying informed about market developments will be crucial for investors considering General Electric stock.
