GE: What's Behind Our Moat Downgrade and Fair Value Cut
GE Capital and lower revenue in the power segment drag on the firm.
General Electric was once heralded as "America's most admired company." While we agree there is a lot to admire about the company, we no longer believe it merits a wide economic moat and are downgrading its moat rating to narrow. We are also lowering our fair value estimate to $15.70 from $19.
Our moat downgrade stems largely from the drag of GE Capital and recent significant revenue and margin reduction in the large revenue power segment; however, we still believe GE's aviation and healthcare segments boast wide moats. And while the firm this week announced plans to separate healthcare, existing shareholders will still own 80% of this attractive asset after the corporate action. Nevertheless, subpar returns from GE Capital will mask the earning power of the firm's moatier assets in the short term.
Joshua Aguilar does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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