GE Vernova is now the new standalone energy company, with GE Aerospace focused on the company's aviation technology products.
GE first announced its restructuring plans in 2021, and GE Healthcare Technologies was spun off last year.
However, the increase in GE stock has been far from consistent. Returns for the stock were 10% in 2021, -11% in 2022, and 96% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 - indicating that GE underperformed the S&P in 2021.
We have identified key business drivers that will be key to GE's future growth. Below are the key drivers of GE's value that present opportunities for upside or downside to our price estimate:
GE Aviation Revenues: The company's LEAP Engine program has been gaining traction with deliveries of 1,570 LEAP units in 2023, up 1,136 from last year.
General Electric (GE) was one of the largest and most diversified core infrastructure and financial services companies in the world, with revenues of around $65 billion in 2023. At that time, the company's products and services included aircraft engines, power generation turbines, and medical imaging machinery.
In 2015, GE announced its plans to realign its portfolio to become an industrially focused company and shrink its financial services business. As a part of this exit plan, GE disposed of most of the assets of GE Capital. The company retained GE Capital Aviation Services (GECAS), Energy Financial Services, and Healthcare Equipment Finance. The company has already sold the majority of its Real Estate debt and equity portfolios to The Blackstone Group. GE also completed the acquisition of Alstom SA's energy business.
In September 2015, GE announced the formation of GE Digital focused on combining its various technology efforts and competing with large digital players such as IBM. GE Digital integrated the company's Software Center, global IT and commercial software teams, and Wurldtech, which provided industrial security systems.
In June 2018, GE announced its intention to streamline its business by focusing on Aviation, Power, and Renewable Energy segments. The primary goal of creating a simpler, stronger, leading high-tech industrial company was to strengthen its balance sheet — which has plagued the company for a long period.
The company has recently split into three different companies focused on Aviation, Healthcare, and Energy. The Healthcare business was split in early 2023, and Energy was separated in early 2024, leaving GE Aerospace as the direct successor of the once-diversified industrial giant that continues to trade under the ticker 'GE'.
The aviation segment accounted for about 50% of total revenue in 2023. GE's aviation market share is expected to grow as a result of increasing demand for air travel and enhanced demand for its LEAP engines. With an ample order backlog and the continued efficiency of its LEAP engine, the segment margin is expected to expand and boost profitability.
With the impact of the Covid-19 pandemic behind us, global airline passenger traffic has seen a sharp recovery, driven by a rebound in global economic growth, increasing trade, and globalization. At the same time, driven by higher global demand for air travel, airline profits are also expected to rise after a challenging pandemic period. As a result, airlines have now begun to place orders for new airplanes, which has forced airplane makers such as Boeing and Airbus to hike their production rates. Boeing estimates that the global fleet of commercial airplanes will climb from 25,900 in 2019 to 49,405 planes by 2040. This tremendous growth in commercial airplane deliveries, in turn, will result in increased demand for airplane engines and components.
GE, being a leading manufacturer of airplane engines, will thus benefit from this upcycle in global commercial aviation.
