This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

General Electric Unplugging Appliance Unit to Spark More Profits

NEW YORK (TheStreet) – General Electric's (GE - Get Report) CEO Jeff Immelt has promised to get the company back to its industrial roots. So it comes as no shock that company announced plans to sell its GE Appliance unit, one of its poorest-performing segments.

Shares of GE were trading at around $26, dow 7.6% on the year to date, trailing the 0.47% gain posted by the Dow Jones Industrial Average.

The stock's underperformance is only part of a story, however. GE has just begun a new chapter with its recent deal for Alstom (ALSMY).

Read More: Warren Buffett’s Top 10 Dividend Stocks

GE's appliance unit has a suitor, drawing interest from Quirky Inc. and Sweden-based Electrolux AB (ELUXY). The questions is how much GE can fetch for its century-old businessh.

Calls and emails to GE representatives were not immediately returned.

The appliance unit wasn't picking up its weight. Revenue continues stagnate. This business accounts for almost 6% of the company's total revenue, but generates roughly 1.6% of total profit. Not to mention, with less than 4% in operating margin, GE was wasting money just by "keeping the lights on." Cutting its losses seems like a logical move.

Nonetheless, it is estimated that GE could generate in the area of $2 billion. It's not game-changing deal for GE, which is generating almost $30 billion in operating cash flow. Still, that's pretty good coin for a business that's producing no growth while delivering poor margins.

The way I see it, GE is positioning itself for the next 10 years of growth. So at around $25 per share, the stock is a sure bet to reach $35 in the next 12 to 18 months. Note, GE would only need to grow its revenue at a long-term rate of 4% to 5%.

Read More: 10 Stocks Carl Icahn Loves in 2014

What's more, with Alstom now firmly in hand, selling the appliance unit will help GE regain the focus it needs to grow its international presence against German rival Siemens AG (SI). This is because GE now owns all of Alstom’s global gas and steam turbine equipment and services business.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
GE $26.81 0.00%
AAPL $125.01 0.00%
FB $78.10 0.00%
GOOG $524.22 0.00%
TSLA $230.43 0.00%


DOW 17,841.98 -86.22 -0.48%
S&P 500 2,080.15 -9.31 -0.45%
NASDAQ 4,919.6440 -19.6830 -0.40%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs