[Asia Economy Reporter Yujin Cho] General Electric (GE) is gaining momentum in its stock price amid expectations of business normalization. The stock price has shown triple-digit growth over the past year due to turnaround expectations.
GE, listed on the US Nasdaq, closed at $13.57 on the 26th (local time), soaring 107% compared to $6.57 at the end of May last year.
This rise was driven by the recovery of its core aviation business and growth expectations in the renewable energy division. The renewable energy division has maintained strength as momentum built on expectations that it will benefit from policy shifts toward a low-carbon economy.
The market’s expectations are rising further. William Blair forecasted that GE’s stock price will double within the next 3 to 4 years.
William Blair analysts evaluated that although GE is expected to record cash outflows in the first quarter of this year, the business environment appears more improved compared to when cash flow was positive a year ago.
They added that GE has completed efficiency improvements through intensive restructuring in its core aircraft engine manufacturing sector, and performance improvement is expected as the COVID-19 situation stabilizes.
GE recently announced plans to establish a dedicated turbine blade production line in the UK. This is a final strategic move in the renewable energy business targeting the UK, which has the world’s largest offshore wind power capacity.
The turbine blade manufacturing plant to be built in the Teesside area of northeast England will begin production in 2023.
GE’s renewable energy division posted revenue of $15.7 billion and an operating loss of $4.6 billion last year, making it the only one among the four major business units to record a loss.
There is growing anticipation that if the renewable energy division succeeds in turning profitable, it will significantly contribute to performance and financial improvements.
CEO Larry Culp aims to reduce total debt to around $95 billion by 2023.
As the first externally appointed CEO since the company’s founding, he took office in October 2018 and has led restructuring efforts for four years, selling or spinning off more than ten businesses including healthcare and lighting, and reorganizing the company to focus on aviation, power, and renewable energy.
Founded in 1892 by Edison as an electric consumer goods business, GE grew into the world’s largest manufacturer by expanding into almost every field that electricity could power, including home appliances, medical devices, aircraft and automobile engines, nuclear fuel, and nuclear power plants.
Early on, in 1932, GE entered the financial industry and expanded its business through an octopus-like strategy, including its subsidiary GE Capital. However, it suffered irrecoverable losses in the capital business, which was its financial lifeline, due to the subprime mortgage crisis, and has been undergoing company-wide restructuring since 2018.
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