Will GE Stock React to Possible $12 Billion Sale of Private Equity Lending Unit?

NEW YORK (TheStreet) -- Shares of General Electric Co.  (GE) were climbing, up 0.02% to $27.30 in early market trading Monday, following reports that the company is nearing a deal to sell more than half of its private-equity-lending unit to Canada Pension Plan Investment Board for $12 billion, according to Bloomberg.

The announcement by GE and Canada's largest pension fund may be made today, and would mark a big step in the industrial company's plan to move away from banking, Bloomberg reports.

In April, GE CEO Jeffrey Immelt first revealed plans to unload roughly $200 billion of its capital assets in order to refocus on its industrial operations.

GE has sold most of GE's real estate to Blackstone Group LP  (BX) and Wells Fargo & Co.  (WFC) for about $23 billion, Bloomberg noted.

General Electric is a diversified infrastructure and financial services company with products ranging from aircraft engines, power generation, oil and gas production equipment, and household appliances to medical imaging, business and consumer financing and industrial products.

The company is based in Fairfield, Conn.

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 7.72%.
  • 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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