The last few years have seen General Electric Company (NYSE: GE) go from one of the largest conglomerates in the United States to having one of the worst years in its history in 2017. The company didn't fare much better in 2018. On June 19, 2018, after spending 111 years on the Dow Jones Industrial Average (DJIA), GE was removed from the list of 30 of the biggest blue-chip stocks.
New Products and Strong Divisions
The company is looking to its new chairman and chief executive officer (CEO), H. Lawrence Culp, Jr., to reverse its downward slide. Culp, who took the helm in Oct. 2018, has announced that going forward GE will commit to two priorities: 1) to improve its financial position and 2) to strengthen the company's core businesses, starting with their Power division.
Culp's statement of priorities reflects the fact that GE has already sold off or is in the process of selling off parts of the company. In addition to selling some subsidiaries, the company has spun off or restructured others. This is in an effort to streamline the company, raise money, reduce debt, improve operational efficiencies, and refocus the company on divisions that have the highest profit potential.
Below we review four of GE's remaining divisions that have proven to be standouts even in the midst of the company's recent turmoil. Plus, we'll highlight Culp's statements indicating how he plans to use these divisions to reinvigorate the company's fortunes.
- General Electric (GE) is at the beginning of a multi-year plan focused on turning around the company's fortunes.
- In recent years, the company has sold several divisions in order to reduce debt, raise money, and refocus efforts on divisions with higher profit potential.
- Chief executive officer H. Lawrence Culp, Jr. has identified four divisions he believes will be at the forefront of the company's efforts to return to profitability: Power, Aviation, Healthcare, and Renewable Energy.
GE's Power division works to develop and implement systems and solutions that utilize resources such as wind, oil, and gas to produce electric power. It sells items such as turbines and generators to commercial customers. In the third quarter of 2019, this segment reported revenues of $3.9 billion, a year-over-year decline of 14%. While disappointing, this decline was expected as the company is in the early stages of a multi-year turnaround that will begin with strengthening its Power division.
According to Culp, GE's equipment and solutions are responsible for more than 2,200 gigawatts of the world’s power generation capacity. In order to increase profitability, the CEO says they will need to run the division better by improving the management of three core functions: 1) material and inventory management 2) product development and delivery, and 3) billings and collections.
GE's Aviation division is one of the leading providers of jet engines and related machinery in the world. The segment's products are used in commercial aircraft, military fighter jets, helicopters, tankers, bombers, and surveillance aircraft. The aviation line of business is one of GE's fastest-growing segments. Revenues in the third quarter of 2019 were up 8%, coming in at $8.1 billion. This increase was driven by sales of the company's LEAP unit. The company sold 455 of the LEAP commercial jet engines, up 152 from the previous year.
Culp says the key to future strong performance in the Aviation division will be to continue its use of digital tools to reduce the average engine assembly time. With the use of these tools, the Aviation team has already reduced the average assembly time by 36%.
GE's Healthcare business is a global outfit operating in five continents around the globe and provides technological solutions all across the healthcare space. Its technology appears in medical diagnostic equipment, patient monitoring systems, drug manufacturing equipment, and devices such as magnetic resonance imaging (MRI), computed tomography (CT), and positron emission tomography (PET) scanners.
Healthcare revenues were $4.9 billion for the third quarter of 2019, up 5% from the same quarter in 2018. Culp sees growing demand in developed and emerging markets for the division's healthcare systems, biologics, and contrast agents.
4. Renewable Energy
The renewable energy segment is getting increased focus at GE. This company area works on developing wind and solar energy solutions. GE's revenue from its Renewable Energy division grew by 4% in 2018. Based on the number of new installations, the company became the top manufacturer of wind turbines in the United States in 2018. For the third quarter of 2019, the company reported orders for its renewable energy products and solutions of $5 billion, an increase of 30%. Revenues of $4.4 billion were up 13% year-over-year.
Culp points to the company's increased emphasis on technology as the reason behind the strides it's making in the division. For example, the company is building the Haliade-X, which he claims will be the world's most powerful wind turbine, a behemoth with blades longer than a football field.