At its 2022 Investor Day, General Electric Company (NYSE: GE) talked about its growth opportunities stemming from its innovative capabilities, organic and inorganic investments as well as projections for 2022 and 2023. The event, attended by the company’s top officials, was held at Greenville, SC-based Power and Aviation facilities.
The shares of the conglomerate showed little movement on Thursday, closing the trading session at $91.33.
The Boston, MA-based multi-sector company has a strong presence in power, healthcare, renewable energy, and aviation arenas. It outlined plans to split into three independent companies — with a focus on Healthcare, Aviation, and Renewable Energy, Power and Digital businesses — in November 2021.
The tax-free spin-off of Healthcare is expected in 2023, while that of the combined Renewable Energy, Power and Digital businesses is predicted to conclude in 2024. Following this, GE will become an aviation-focused company.
Highlights of the Event
General Electric noted that its solid product offerings, zeal for innovation, and capital deployments for strengthening businesses have been beneficial over time. It is well-positioned in its key markets, with over four million installations in Healthcare, 7,000 gas turbines in Power, 400 GW of equipment in Renewable Energy, and 26,200 military and 39,400 commercial aircraft engines in Aviation.
Regarding the financial announcements, General Electric kept its 2022 projections intact. Organic revenues growth assumption is at high-single-digit while expansion in adjusted operating margin is unchanged at 150 basis points. Adjusted earnings are expected within the $2.80-$3.50 per share range, and free cash flow is predicted to be $5.5-$6.5 billion.
For Healthcare, the company anticipates benefiting from healthy demand and growth investments, while remaining cautious of supply-chain restrictions and managing costs well. On the other hand, stability in gas demands worldwide and utilization of GE’s gas turbine are favorable factors for Power.
Market recovery is expected to play a vital role in Aviation. Benefits are expected from growth in the military and recovery in commercial aftermarket businesses. For Renewable Energy, healthy demand in the offshore wind, as well as cost-management, and selectivity in the onshore wind will be prime driving factors.
In 2023, the company targets adjusted operating profit to be approximately $10 billion and free cash flow to be over $7 billion.
In the long-term, General Electric anticipates Healthcare’s organic sales to grow by mid-single digits. Renewable Energy and Power organic sales are likely to expand in the low-single-digit, while Aviation revenues are projected to increase in the mid-single-digit, organically.
Official Comments
The Chairman and CEO of General Electric, H. Lawrence Culp, Jr., said, “Our teams are excited about the future as we lay the groundwork for our planned three independent companies focused on the critical global needs of precision health, the energy transition, and the future of flight. As strong, customer-centric businesses, each will benefit from greater accountability, team alignment, and capital allocation flexibility to enable a more sustainable, healthier, and connected future.”
Wall Street’s Take
Recently, Credit Suisse analyst, John Walsh, reiterated a Buy rating on General Electric and lowered the price target to $116 (27.01% upside potential) from $122.
The analyst sees supply-chain restrictions concerning General Electric and expects the net price/cost to leave an adverse impact in 2022. However, he expects improvements in the second half.
Wall Street is cautiously optimistic about General Electric’s growth prospects and has a Moderate Buy consensus rating based on 11 Buys and 4 Holds. The average General Electric price target of $112.33 suggests 22.99% upside potential from the last closing price of $91.33.
Investors’ Sentiment
Per TipRanks’ Stock Investors tool, investors currently have a Very Positive stance on General Electric. In the past 30 days, an increase of 5.4% has been recorded in the number of portfolios with exposure in General Electric.
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