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General Electric Co GE

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Morningstar’s Analysis

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1-Star Price

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5-Star Price

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Economic Moat

PREMIUM

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PREMIUM

GE on Solid Footing as it Marches Toward a High-Single-Digit Free Cash Flow Margin; We Raise FVE

Joshua Aguilar Equity Analyst

Analyst Note

| Joshua Aguilar |

Despite the headline stock trade-off, narrow-moat-rated General Electric had a solid first quarter. We increase our fair value estimate to $15.10 from $14.10 previously, primarily due to interest rate tailwinds in GE’s pension liability, as well as time value of money. However, we also raised our fair value due to greater than expected progress in both healthcare and aviation’s margin profile (with the latter already hitting its 2021 target) in the first quarter, which itself was offset by weaker than expected top line revenue from aviation. With this latest raise, GE now is the cheapest name among our larger U.S. multi-industrials.

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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.

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

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