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General Electric Makes Tender Offers for $5B Debt Securities

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General Electric Company (GE - Free Report) yesterday announced plans to reduce debts by $5 billion through tender offers to purchase the U.S. dollar and Euro-denominated debt securities. The tender offers are expected to expire on Oct 9, 2019.

The news came a day after General Electric announced plans for reduction of its stake in Baker Hughes, a GE company by 20%. It intends on using the net proceeds of roughly $3 billion from the Baker Hughes transaction for lowering debts.

Inside the Headline

As noted, General Electric will spend approximately $2.5 billion each for purchasing the U.S. dollar and Euro-denominated debt securities. Principal amount of both types of securities is $1,000 or €1,000. Securities purchased by the company will be retired and cancelled.

Notably, the U.S. dollar denominated securities will include 4.500% of Notes due 2044, 4.125% of Notes due 2042, 3.375% of Notes due 2024 and 2.700% of Notes due 2022. Further, the Euro-denominated securities will include 2.125% of Notes due 2037, 1.875% of Notes due 2027, 1.500% of Notes due 2029, 1.250% of Notes due 2023, 0.875% of Notes due 2025 and 0.375% of Notes due 2022.

The move will enable General Electric to strengthen its balance sheet. The company targets to bring Industrial net debt/EBITDA ratio to less than 2.5 and GE Capital debt/equity ratio to less than 4.

As of June 30, 2019, General Electric’s Industrial borrowings stood at $31.8 billion, down from $32.3 billion recorded at the end of 2018. GE Capital’s borrowings was at $40 billion, down from $43 billion at 2018 end.

Zacks Rank, Share Price Performance and Earnings Estimates

General Electric currently has a market capitalization of $81.7 billion and a Zacks Rank #3 (Hold).

This company’s share price has gained 22.4% so far in 2019 compared with 19.8% growth recorded by the industry.




In the past 60 days, earnings estimates for 2019 and 2020 have been revised upward, reflecting positive sentiments about the company’s growth prospects. Currently, the Zacks Consensus Estimate for General Electric’s earnings is pegged at 63 cents for 2019 and 74 cents for 2020, suggesting growth of 1.6% and 1.4% from the respective 60-day-ago figures.

General Electric Company Price and Consensus

 

General Electric Company Price and Consensus

General Electric Company price-consensus-chart | General Electric Company Quote

Stocks to Consider

Two better-ranked stocks in the industry are Carlisle Companies Incorporated (CSL - Free Report) and United Technologies Corporation (UTX - Free Report) , currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 60 days, earnings estimates for 2019 have improved for Carlisle Companies and United Technologies. Further, average earnings surprise in the last four quarters was positive 17.16% for Carlisle Companies and 13.19% for United Technologies.

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