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GE Leaves Dow, Trades Up 6.5%; Plus Housing News

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Tuesday, June 26, 2018

Shares of U.S. industrial giant General Electric (GE - Free Report) , Thomas Edison’s old company, are trading up higher than 6.5% in today’s pre-market on new headlines that the long-beleaguered firm will be spinning off its healthcare business and exiting its position on oil & gas company Baker Hughes over the next 2-3 years, reducing its considerable debt by $25 billion in the process. This comes on the very day GE is being replaced by Walgreens Boots Alliance (WBA - Free Report) on the 30-company blue-chip index.

Since he was appointed to take the reins of GE last August, CEO John Flannery has acknowledged the difficulties he had inherited and that he will be focused on turning its core businesses around. Since then, and despite GE stock having gone south by roughly 50% year over year, it would appear he has stayed true to his word. The company focus will now be in the realms of Power (with a particular interest in renewable energy such as wind turbines) and Aviation. The healthcare business spin-off, while not articulated at this early stage, will likely take a year or two to take place, whatever form it ultimately takes.

Old New Housing Data

A lagging but accurate indicator on the U.S. housing market, the Case Shiller Home Price Index, has released its results for the month of April. Prices grew 6.4% in U.S. homes year over year, up a seasonally adjusted 0.3% This follows yesterday’s better-than-expected New Home Sales report, which brought 689K new homes in the U.S. for the month of May. Expectations had been for 668K new homes last month, and this April read saw 646K new homes.

Housing data continues upward, relatively unabated. The Case Shiller growth report ticked down 20 basis points from its previous read, but 6-and-a-half percent price gains represent a healthy market, no matter how you slice it. The top three cities for home price growth in April were Seattle, San Francisco and Las Vegas. Pending Homes Sales, the sister report to yesterday’s New Home Sales, are expected before the opening bell tomorrow.

Premier home builder Lennar Homes (LEN - Free Report) posted a 250% positive earnings surprise on its fiscal Q2 this morning, bringing in $1.58 per share from the 91 cents a year ago. Revenues of $5.46 billion outpaced the Zacks consensus estimate by more than 4%. This report has helped boost the fortunes of the homebuilder by about 6% in today’s pre-market; Lennar had been trading down 22% since the beginning of the calendar year. The company has now beaten earnings estimates in 3 of its last 4 quarters. For more on LEN's earnings, click here.

Mark Vickery
Senior Editor

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