Now it’s time to see what General Electric’s businesses are really worth. In two weeks, GE’s power business will be spun off from the aerospace operations and begin trading separately as GE Vernova on the New York Stock Exchange under the ticker symbol GEV. The event marks the final step of a process that began in late 2021, when GE said it would break up its operations into three parts — health care, aviation and energy. The health-care spinoff, which created GE Healthcare Technologies in January 2023, was the first step, and the April 2 move of GE Vernova is the last. GE stock has been on a tear, outperforming the market over the past year, as investors bet that the company’s break-up will unlock still more value. They haven’t been disappointed so far. Since the health-care spinoff, GE shares have risen above $170 from the $60s. Through midday Tuesday, GE has gained 36% since the start of this year alone. By now, GE has reached the average analysts’ price target, according to FactSet. Still, analysts remain very optimistic on the stock with 68% rating it the equivalent of a buy and 32% saying it’s a hold. GE 1Y mountain General Electric shares over the past year. GE Healthcare has also had a solid run since its debut, rising above $90 from the $60s. Gordon Haskett analyst Don Bilson said GE’s break-up has been “an event-driven home run.” He expects anyone buying GE Vernova shares in April will get “a 50% move over the next fourteen months.” At the end of last year, Bank of America analyst Andrew Obin ranked GE among his top industrial picks for 2024 because he anticipated the spinoff would drive a re-rating of the stock, giving it a higher price-to-earnings multiple from investors. He continues to believe that, and currently has a $175 price target for GE. “We argue [the premium] is warranted given GE’s above-peers earnings trajectory,” Obin said. Obin said his target is based on a multiple of 17 times an enterprise value to EBITDA, based on 2025 estimates, which is higher than the peer average of 16 times EV/EBITDA. ‘Crown jewel of aerospace’ When it comes to the aerospace and defense business, there is a lot of visibility into GE Aerospace because of its multiyear backlog of business. “Since I’ve been following the industry, it has always been known as the crown jewel of aerospace and defense,” said Tony Bancroft, a portfolio manager at Gabelli Funds, which owns shares of GE in its Gabelli Commercial Aerospace & Defense ETF (GCAD) . GE’s aerospace business benefits from a dominant market position where it leads in both widebody and narrowbody jet engines. Deutsche Bank analyst Scott Deuschle said it’s a “self reinforcing loop” as GE’s market clout gives it a steady stream of profits it can reinvest in innovation to ensure its technology stays ahead of the pack, and keep its prices attractive. “This raises GE’s competitive moat, and enhances the terminal value of the business,” Deuschle wrote in a reseach note in mid-February. Bancroft also likes aerospace’s leadership, but he said the “real sweet spot” is its aftermarket services business, which provides a steady stream of recurring revenue. Essentially, companies that purchase GE’s engines sign up for a service program, which acts like an insurance policy for the customers. If GE is able to keep maintenance work efficient, the business is highly profitable, he said. The aerospace business, which accounts for about 45% of GE’s current revenue, will continue to trade under the GE ticker symbol and be helmed by Larry Culp. At a recent investor meeting , GE forecast double-digit revenue growth this year, and predicted profits would rise 15%. Many are hoping that as GE’s balance sheet improves, it will be able to return more cash to shareholders through buybacks and dividends. The company currently pays a quarterly dividend of 8 cents a share, for a nominal dividend yield of just 0.19%. Bancroft expects Culp to continue to focus on improving the company’s performance year after year. “He’s an operator,” he said. “He’s one of these kinds of guys, he just knows how to make this stuff work.” Wind poised for growth For investors who have owned GE stock and will be receiving shares of the energy business in the spinoff, it’s like getting the energy business for free, Bancroft said. He anticipates there will be strong demand for GE Vernova stock from ESG funds, who will see it as an attractive way to play the transition to more sustainable power sources. Bank of America’s Obin estimates the energy business represents about $29 of GE’s current share price. Still, GE Vernova was a weak spot for the company since 2015, according to analysts. This has mostly been a result of losses in the wind business, but those are expected to narrow over the next year or so, the company said at a recent analyst day where it laid out its forecast. GE Vernova expects this year’s revenue will total between $34 billion and $35 billion, with free cash flow of $700 million to $1.1 billion. By 2028, it expects to see mid-single digit revenue growth and adjusted EBITDA margins of 10%, up from an expected mid-single digit rate in 2024. In recent years, order growth for the wind business has been choppy. However, Obin said the forecast “seems conservative.” “GE Vernova’s backlog provides a high degree of visibility, with ~50% of 2025 revenue already in the backlog,” Obin wrote in early March. “This is particularly true for the Electrification segment, which saw backlog more than double in 2023.” —CNBC’s Michael Bloom contributed to this report.
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