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General Electric Co GE

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GE's Breakup One of the Catalysts We've Been Hoping For; We Maintain Our $131 Fair Value Estimate

Joshua Aguilar Equity Analyst

Analyst Note

| Joshua Aguilar |

We maintain our discounted cash flow-derived fair value estimate of $131 per share for General Electric following the news that the conglomerate will separate into three public companies. We think this news is an important catalyst that will help close the persistent price/value gap for the stock, second only to the company hitting its target of high-single-digit free cash flow margin by 2023, which we think is tantamount to the GE story. Nonetheless, investors should cheer the news that management has committed to this target by 2023, as opposed to “2023-plus,” as it had previously communicated. Additionally, investors will now have the opportunity to own either or both exceptional franchises in aviation and healthcare without having to hold on to GE’s more challenged businesses.

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Company Profile

Business Description

GE was formed through the combination of two companies in 1892, including one with historical ties to American inventor Thomas Edison. Today, GE is a global leader in air travel, precision health, and in the energy transition. The company is known for its differentiated technology and its massive industrial installed base of equipment sprawled throughout the world. That installed base most notably includes aerospace engines, gas and steam turbines, onshore and offshore wind turbines, as well as medical diagnostic and mobile equipment. GE earns most of its profits on the service revenue of that equipment, which is generally higher-margin. The company is led by former Danaher alum Larry Culp who is leading a multi-year turnaround of the storied conglomerate based on Lean principles.

5 Necco Street
Boston, MA, 02210
T +1 617 443-3000
Sector Industrials
Industry Specialty Industrial Machinery
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 174,000