General Electric Co. has saved its best year for its last.
At the beginning of the second quarter, GE’s power and renewable-energy business will be spun off as GE Vernova, while its remaining business will be relaunched as GE Aerospace. That follows the conglomerate’s separation of GE HealthCare Technologies Inc.
GEHC,
in December 2022.
But rather than mourn the final breakup of the 150-year old company, which was co-founded by Thomas Edison, Wall Street cheered like it never had before.
GE’s stock
GE,
has rocketed 95.1% in 2023 as of afternoon trading Friday. That would be by far the stock’s best year on record, based on available data going back to 1972, according to Dow Jones Market Data. The next best year was 1982, when it gained 65.4%. In comparison, the S&P 500 index
SPX
has rallied 24.2% this year.
Read: GE stock sees biggest rally in more than 2 years after a big earnings beat, raised outlook.
As good as the stock’s performance has been leading up to the breakup, most analysts feel like investors still have more to gain. Keep in mind that in many cases, a company’s parts are worth more individually than they are valued as part of a whole.
Wells Fargo’s Matthew Akers has a pre-breakup target of $144 on GE’s stock, which implies about 13% upside from current levels.
“GE combines an attractive business with high aftermarket mix, solid management team with a clean balance sheet, L-T margin upside and built-in catalyst with the Vernova spin in early Q2,” Akers wrote.
J.P. Morgan’s Seth Seifman said he believes the combined equity values of GE Vernova and GE Aerospace, when including the company’s equity stake in GE HealthCare, is about $149 billion. That compares with GE’s current market capitalization of about $139 billion.
Of the 18 analysts surveyed by FactSet who cover GE, 12 are bullish and six are neutral, while there are no bears. And the average price target is $139.23, or about 9% above current levels.
GE’s 2023 marks the culmination of a five-year turnaround for the stock engineered by current Chief Executive Larry Culp, who will remain as CEO of GE Aerospace.
GE’s stock has nearly tripled in the five years that Larry Culp has been CEO, outperforming the S&P 500 by a wide margin.
General Electric Co.
The stock had suffered its worst year ever in 2018, plunging 56.6%, just after it had its fourth-worst year in 2017, when it suffered a 44.8% decline.
Things got so bad for GE that it got booted from the Dow Jones Industrial Average
DJIA
in June 2018, ending a record 111-year run in the blue-chip barometer.
Culp was named CEO in October 2018. During his tenure, GE’s stock has had only two down years. It fell 3.2% in 2020 as the COVID-19 pandemic wreaked havoc on the aerospace business, and slumped 11.3% in 2022 as spiking inflation and interest rates fueled fears that a recession was on the horizon.
But since the end of 2018, GE’s stock has climbed 181%, while the S&P 500 has rallied 90% and the Dow has gained 61%.
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