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General Electric Stock Soars On Plans to Split Iconic Group Into Three Companies

General Electric will split into three separate companies over the next two years in what will be the biggest shakeup in the iconic industrial group's 130- year history.

General Electric  (GE) - Get General Electric Company Report shares soared higher Tuesday after the industrial group unveiled plans to split into three separate companies, marking one of the most significant changes in the industrial giant's 130-year history. 

General Electric will form three different companies -- focusing on energy, healthcare and aviation -- with current CEO Larry Culp tabbed as non-executive chairman of the developing healthcare group -- which will be run by Peter Arduini -- when it is spun-off in 2023.

Tax-free spinoffs of the energy and power divisions will occur in 2024, as they're combined into a single group lead by Scott Strazik, General Electric said. The bulk of the existing company remaining in place -- with the GE name -- to focus on aviation and will be lead by John Slattery. 

Collectively, the separations will cost around $2.5 billion, GE said, when taxes and operational expenses are ultimately tallied. 

"At GE we have always taken immense pride in our purpose of building a world that works. The world demands—and deserves—we bring our best to solve the biggest challenges in flight, healthcare, and energy," said Culp. "By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees."

“Today is a defining moment for GE, and we are ready," he added. "Our teams have done exceptional work strengthening our financial position and operating performance, all while deepening our culture of continuous improvement and lean."

"We’re not finished—we remain focused on continuing to reduce debt, improve our operational performance, and strategically deploy capital to drive sustainable, profitable growth," Culp said. "We have a responsibility to move with speed to shape the future of flight, deliver precision health, and lead the energy transition.  

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General Electric shares were marked 7% higher in early trading Tuesday to indicate an opening bell price of $116.00 each, a move that extends the stock's year-to-date gain to around $38%.

Late last month, General Electric posted stronger-than-expected third quarter earnings of 57 cents per share, and boosted its full-year profit outlook to between $1.80 to $2.10 per share, but narrowed its key industrial cash flow forecast amid what it called a "challenging operating environment" and "global supply chain disruptions".

GE said at the time that the biggest supply chain hit came in its healthcare division, adding it expects disruptions to last through at least the first half on next year, alongside a 'more challenging" inflationary environment. 

The group said Tuesday, however, that it expects to deliver about $5 billion in industrial free cash flow this year, a figure that would be modestly higher than its revised forecast of between $3.75 billion and $4.75 billion.

GE's Power division generated just over $4 billion in revenues over the third quarter, with segment income of $204 million. Renewable energy lost $151 million on $4.2 billion in revenues, GE said, while aviation rebounded with net income of $846 million on $5.4 billion in revenues.

GE Healthcare had net income of $704 million on revenues of $4.4 billion, the company said.