Will GE Stock be Affected by Start of Healthcare Financing Unit Sale?

NEW YORK (TheStreet) -- General Electric (GE) is said to have started to reach out to potential buyers for its GE Capital Healthcare Financial Services Unit as part of its continuing effort to exit the financial services industry and focus on its industrial business.

The conglomerate's healthcare unit is valued between $10 billion and $11 billion, sources told The Wall Street Journal.

The business lends to healthcare companies that specialize in housing for seniors, medical device makers, hospitals, pharmaceuticals and other businesses.

GE is looking to get rid of most of its GE Capital business over the next year, The Journal noted, adding that the company has already agreed to sell a portfolio of real estate assets for $26.5 billion.

Earlier this week The Journal reported that GE has started the bidding process for a $40 billion portion of its U.S. commercial lending business. A deal could be announced as early as this week, the publication said.

Shares of GE are lower by 0.31% to $27.47 at the start of trading on Thursday morning.

Separately, TheStreet Ratings team rates GENERAL ELECTRIC CO as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate GENERAL ELECTRIC CO (GE) a HOLD. The primary factors that have impacted our rating are mixed-some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for GENERAL ELECTRIC CO is rather high; currently it is at 51.25%. It has increased from the same quarter the previous year.
  • Net operating cash flow has increased to $6,090.00 million or 22.75% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 7.69%.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.7%. Since the same quarter one year prior, revenues slightly dropped by 2.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The debt-to-equity ratio is very high at 3.24 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Industrial Conglomerates industry and the overall market, GENERAL ELECTRIC CO's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: GE Ratings Report

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