NEW YORK (TheStreet) -- General Electric (GE) shares are down 1.2% to $26.77 in early afternoon trading on Monday after the company announced the sale of its fleet management division in the U.S., Mexico, Australia and New Zealand to Canada's Element Financial (ELEEF) for $6.9 billion.
The company also signed a memorandum of understanding to sell its European fleet segment to Arval, a BNP Paribas (BNPQY) subsidiary, for what Reuters sources say could be about $3.3 billion.
The asset sales are part of the company's previously announced plans to become more efficient by selling off non-essential GE Capital assets not related to its manufacturing and industrial equipment sector.
Element expects the company to close the U.S. and Mexico deal in the third quarter and the Australia and New Zealand deal in the fourth quarter this year.
Separately, the company announced Friday night that it will meet with European regulators on Thursday to discuss its proposed $14 billion takeover bid for Alstom's (ALSMY) power unit.
The European Commission has warned the company that the deal would harm energy competition in the European bloc.
Insight from TheStreet's research team
Dividend Stock Adviser portfolio manager David Peltier wrote about the company's fleet management sale in a blog post today in Dividend Stock Adviser titled "GE to Reap $6.9 Billion in Asset Sale". Here is what Peltier had to say:
General Electric announced overnight that it's selling the majority its fleet management business for $6.9 billion.
GE is selling the businesses that cover the U.S, Mexico, Australia and New Zealand to Canada-based Element Financial. In addition, the company said that is has reached a provisional deal to sell its European fleet management business to a subsidiary of France-based BNP Paribas.
Management reiterated that it's on track to shed $100 billion of GE Finance assets by the end of the year, which will help fund the company's $50 billion share repurchase program.
The stock is ticking lower today along with the broader market and recently changed hands around $26.90. We maintain that GE is attractive to purchase for the 3.4% dividend yield.
-David Peltier, 'GE to Reap $6.9 Billion in Asset Sale', 6/29/2015
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, good cash flow from operations and increase in stock price during the past year. 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 7.65%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.8%. 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