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General Electric Stock Gains Amid Talks To Sell Nuclear Turbines Division To EdF

GE is is preliminary talks to sell its nuclear turbines business to Électricité de France for a reported $1.2 billion.

General Electric  (GE) - Get General Electric Company (GE) Report shares traded higher Wednesday after the industrial group said it's in preliminary talks to sell some of its nuclear power assets to France's Électricité de France for around $1.2 billion.

GE Steam Power, which is run by recently-appointed CEO Valerie Marjollet, purchased the power and grid business of France-based Alstom in 2015 and now provides steam turbines for Europe's second-largest economy. It's also the main supplier of EdF's nuclear power plant at Britain's Hinkley Point, a $30 billion project that is expected to come online in 2026.

Steam is one of the four units in GE's broader Power division, which generated around $300 million in operating profits over the second quarter, and its 7% operating margin was the best in four years. A sale of the steam turbines business, analysts have argued, would leave Power to focus more on higher-margin services linked to its existing portfolio. 

The potential Steam Power sale would modestly accelerate GE’s progress on FCF margins, deleveraging, and strategic repositioning, in our view,” said Bank of America analyst Andrew Obin when news of the sale was first reported by France's La Tribune newspaper late last month.

General Electric shares were marked 2.7% higher in early trading Wednesday to change hands at $98.30 each. 

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General Electric shares have fallen around 3% since they began trading on an adjusted basis in early August following a 1-for-8 stock split the group said would "reduce the number of shares outstanding "to a number more typical of companies with comparable market capitalization", taking the total from around 8.8 billion to 1.1 billion.

GE said in late July that adjusted non-GAAP earnings for the three months ending in June were pegged at 5 cents per share, up from a loss last year and 2 cents ahead of the Street consensus forecast. Group revenues also beat the Street, rising 9% to $18.3 billion.

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Aviation segment revenues rose 10% from last year to $4.84 billion, GE said, while orders were up 47% to $5.5 billion. Healthcare revenues jumped 14% to $4.45 billion while renewable energy revenues gained 16% to $4.05 billion.

Looking into the second half of the year, GE reiterated that its sees adjusted earnings in the region of 15 cents to 25 cents per share, but lifted its forecast for industrial free cash flows to between $3.5 billion and $5 billion. Industrial free cash flow for the first quarter was $388 million, GE said, compared to -$845 million in the previous quarter.