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GE Remains Poised for Long-Term Growth with Restructuring
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On Sep 13, Zacks Investment Research updated the research report on industrial goods manufacturer General Electric Company (GE - Free Report) .
General Electric is actively engaged in massive restructuring initiatives to create a simpler and nimbler firm. From a classic conglomerate with diversified business interests in financial services, media, industrial and technology-based operations, the company is pruning its operating portfolio to focus on core manufacturing businesses with a digital edge.
Recent Divestitures
In end-June, General Electric inked agreements with three separate buyers to divest majority of GE Capital’s restaurant franchise financing assets in the U.S. These included assets in the Southwest and Southeast that were sold to First Horizon National Corporation, a Tennessee-based bank with assets of approximately $27 billion. Assets in the Midwest and part of the West were sold to Wintrust Financial Corporation, an Illinois-based bank with approximately $23 billion in assets. GE Capital assets in the East were sold to Sterling National Bank, a $13-billion-asset holding bank headquartered in New York.
In the first week of July, General Electric completed the divesture of its Asset Management business to asset management firm State Street Corporation (STT - Free Report) for approximately $485 million. General Electric intends to utilize the proceeds from the transaction for the GE Pension Trust, thereby increasing the trust assets used for paying GE pension plan benefits. (Read More: GE Closes Asset Management Business Sale with State Street).
Last month, General Electric and Hitachi, Ltd. (HTHIY - Free Report) entered into a definitive agreement with BWXT Canada Ltd. to divest the GE Hitachi Nuclear Energy Canada Inc. unit for an undisclosed amount. BWXT Canada is a subsidiary of BWX Technologies, Inc. (BWXT - Free Report) , a power generation firm headquartered in Lynchburg, VA, which supplies precision manufactured components and services to the commercial nuclear power industry.
ShipXpress Acquisition
GE Transportation, an operating segment of General Electric, recently acquired ShipXpress, a premier provider of cloud-based software solutions, for an undisclosed amount. Founded in Apr 2000, ShipXpress provides cloud-based software solutions that allow transportation, industrial, and commodities businesses to work in harmony with their supply chain partners. ShipXpress provides its services to major North American railroads and Fortune 500 companies in the energy, agriculture, chemicals, and metal space.
The deal is likely to expand General Electric’s Transportation portfolio and enrich its human capital as it will gain nearly 200 industry, technical, and software development experts who have been providing their services to ShipXpress. The amalgamation of ShipXpress’ innovative software products and General Electric’s advanced sensing technology will further help enhance the Predix platform of the latter.
Moving Forward
Although General Electric is taking steps to limit its financial exposure by divesting GE Capital assets, it remains susceptible to various market risks. The company’s objectives of simplification and productivity improvement pose operational execution risks as well. For a company as large as General Electric, the additional revenues needed for growth are quite large, posing a challenge in developing businesses on such a vast scale.
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GE Remains Poised for Long-Term Growth with Restructuring
On Sep 13, Zacks Investment Research updated the research report on industrial goods manufacturer General Electric Company (GE - Free Report) .
General Electric is actively engaged in massive restructuring initiatives to create a simpler and nimbler firm. From a classic conglomerate with diversified business interests in financial services, media, industrial and technology-based operations, the company is pruning its operating portfolio to focus on core manufacturing businesses with a digital edge.
Recent Divestitures
In end-June, General Electric inked agreements with three separate buyers to divest majority of GE Capital’s restaurant franchise financing assets in the U.S. These included assets in the Southwest and Southeast that were sold to First Horizon National Corporation, a Tennessee-based bank with assets of approximately $27 billion. Assets in the Midwest and part of the West were sold to Wintrust Financial Corporation, an Illinois-based bank with approximately $23 billion in assets. GE Capital assets in the East were sold to Sterling National Bank, a $13-billion-asset holding bank headquartered in New York.
In the first week of July, General Electric completed the divesture of its Asset Management business to asset management firm State Street Corporation (STT - Free Report) for approximately $485 million. General Electric intends to utilize the proceeds from the transaction for the GE Pension Trust, thereby increasing the trust assets used for paying GE pension plan benefits. (Read More: GE Closes Asset Management Business Sale with State Street).
Last month, General Electric and Hitachi, Ltd. (HTHIY - Free Report) entered into a definitive agreement with BWXT Canada Ltd. to divest the GE Hitachi Nuclear Energy Canada Inc. unit for an undisclosed amount. BWXT Canada is a subsidiary of BWX Technologies, Inc. (BWXT - Free Report) , a power generation firm headquartered in Lynchburg, VA, which supplies precision manufactured components and services to the commercial nuclear power industry.
ShipXpress Acquisition
GE Transportation, an operating segment of General Electric, recently acquired ShipXpress, a premier provider of cloud-based software solutions, for an undisclosed amount. Founded in Apr 2000, ShipXpress provides cloud-based software solutions that allow transportation, industrial, and commodities businesses to work in harmony with their supply chain partners. ShipXpress provides its services to major North American railroads and Fortune 500 companies in the energy, agriculture, chemicals, and metal space.
The deal is likely to expand General Electric’s Transportation portfolio and enrich its human capital as it will gain nearly 200 industry, technical, and software development experts who have been providing their services to ShipXpress. The amalgamation of ShipXpress’ innovative software products and General Electric’s advanced sensing technology will further help enhance the Predix platform of the latter.
Moving Forward
Although General Electric is taking steps to limit its financial exposure by divesting GE Capital assets, it remains susceptible to various market risks. The company’s objectives of simplification and productivity improvement pose operational execution risks as well. For a company as large as General Electric, the additional revenues needed for growth are quite large, posing a challenge in developing businesses on such a vast scale.
Nevertheless, we remain encouraged with the healthy growth potential of this Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>