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Here's Why You Should Hold on to General Electric (GE) Now

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General Electric (GE - Free Report) is benefiting from strong performance of the Aerospace and Healthcare segments. Continued recovery in the commercial market bodes well for the Aerospace unit. Robust consumer demand is driving orders in the segment. Significant growth in commercial services and continued strength in spare parts sales are boosting segmental revenues. The Healthcare segment is benefiting from Imaging, Ultrasound and HTS services sales. Strong order demand in the Healthcare segment is expected to continue to drive revenues. The company expects mid-single digit revenue growth in the Healthcare segment for the full year.

Despite the impact of supply chain disruptions, including labor and material shortages and high logistics costs, GE’s bottom line is supported by cost-control measures and pricing actions. The company’s bottom line jumped 95% year over year in the second quarter of 2022 on a 2% increase in sales.

General Electric’s commitment to reward its shareholders through dividends and share buybacks is encouraging. In March 2022, the company’s board of directors authorized the share repurchase program of up to $3 billion. GE bought back approximately 4.6 million shares for $0.3 billion in the second quarter under this authorization. In the first quarter, the company paid out dividends worth $140 million to shareholders compared with $148 million in the year-ago period.

General Electric’s focus on strategically acquiring businesses while simultaneously divesting non-core operations should fuel its growth. In January 2022, the company completed the acquisition of Opus One Solutions Energy Corporation. The Opus One buyout enhances GE Digital’s capabilities to support the use of renewable and distributed energy resources.

GE Healthcare’s buyout of Zionexa in May 2021, the Transformer Solutions business of SPX Corporation in October 2021 and General Electric’s acquisition of BK Medical in December 2021 are worth mentioning. The company divested the GE Capital Aviation Services business in November 2021, the lighting business in July 2020, the BioPharma business in March 2020 and GE Transportation in February 2019. Benefits from restructuring initiatives are aiding the company’s bottom line.

General Electric announced that it would split its businesses into three independent companies, comprising GE Healthcare (to be completed in early 2023), GE Aviation, and the combined operations of GE Digital, Renewable Energy, and GE Power (to be completed in early 2024). The separation has been structured as tax-free spin-offs and is intended to strengthen the operating performance and the financial position. General Electric will operate as an aviation-focused company starting in early 2024.

In light of the abovementioned positives, we believe investors should hold on to this Zacks Rank #3 (Hold) stock now. Gradual easing of supply-chain constraints and continued expansion in manufacturing activities place General Electric well for future growth.

Key Picks

Some better-ranked stocks within the Conglomerates sector are as follows:

Carlisle Companies (CSL - Free Report) currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for CSL’s 2022 earnings has been revised upward by 14.6% in the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks.

Carlisle has an estimated earnings growth rate of 114.4% for the current year. Shares of CSL have rallied 14.2% in the past three months.

Icahn Enterprises (IEP - Free Report) presently carries a Zacks Rank #2. The Zacks Consensus Estimate for IEP’s 2022 earnings has been revised upward by more than 100% in the past 60 days.

Icahn Enterprises has an estimated earnings growth rate of 144.4% for the current year. Shares of IEP have gained 0.2% in the past three months.

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Icahn Enterprises L.P. (IEP) - free report >>

Carlisle Companies Incorporated (CSL) - free report >>

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