The last few years have certainly not been kind to General Electric (GE). The multinational conglomerate came in as the worst-performing stock on the Dow Jones Industrial Average in 2017, only to be replaced on the index by Walgreens Boots Alliance Inc. less than a year later in June 2018. GE had been included in the DJIA since 1907. As the conglomerate struggles to turn around its fortunes by restructuring verticals, spinning off companies, and selling off business lines, investor confidence remains low and the company's stock price continues to head south. As of September of 2019, GE's stock price is less than a sixth of what it was in early 2000.
Since September of 2018, GE has been led by H. Lawrence Culp, Jr., CEO, and Chair. Culp is the 12th CEO in the company's history. Several other executives at GE are also recently-appointed: Kevin Cox (Chief Human Resources Officer) began in February of 2019, Chris Drumgoole (Vice President, Chief Information Officer) began in July of 2018, and Rachel Duan (Senior Vice President, President, and CEO of GE Global Growth Organization) began in January of 2019.
On November 6, 2018, General Electric announced the latest of its subsidiary selloffs. According to the Wall Street Journal, General Electric has agreed to sell Current, a GE subsidiary that produces energy management systems, to American Industrial Partners (AIP) for an undisclosed amount. Boston-based start-up Current was established by General Electric on October 7, 2015, with a revenue of approximately $1 billion. The company is also in the process of selling a piece of its health care operation to Danaher Corporation for a reported $21.4 billion, a move that could dramatically improve the company's balance sheet.
- GE is working to turn itself around after a rough period, through restructuring, spinning off companies and selling off some business lines.
- Even so, the company continues to benefit from strength in several of its subsidiaries. Among the standouts:
- GE Aviation makes jets, turboprop engines and software used by the aviation industry, and is among GE's most profitable holdings.
- Even after GE spun off its Healthcare business and ultimately sold it to Danaher in a $21 billion deal set to close in the fourth quarter, GE Healthcare remains a lucrative subsidiary.
- GE Power makes technology that generates power using wind, oil, gas and water and is the company's biggest business division; however, the unit has struggled in recent years.
According to GE's 2018 10-K, the company saw net earnings of -$22.8 billion in 2018. In 2017, this figure was -$8.9 billion, while in 2016 the company posted a positive earnings figure of $6.8 billion. Consolidated revenues for 2018 were $121.6 billion, up 3% year-over-year.
In spite of recent divestments, GE continues to own and operate many subsidiaries. Below, we'll take a closer look at some of the leading companies and segments in the GE stable.
The number of years GE spent on the Dow Jones Industrial Average before being removed in 2018 from the closely-watched list of 30 of the biggest blue-chip stocks.
1. GE Aviation
One of General Electric's few business segments with consistent growth, GE Aviation provides jets and turboprop engines and designs software used by major aviation corporations. The segment has plans to have 60,000 jet engines connected to the internet by 2020, which they claim will save fuel and create fewer delays at airports. Overall in 2018, GE Aviation enjoyed a profit margin of 21.2%, with almost $30.6 billion in revenue for the year.
GE Aviation is one of the company's most profitable subsidiaries.
2. GE Healthcare
Even with the $21.4 billion pending sale of the biopharma branch of GE Healthcare to Danaher, this subsidiary of GE is one of the company's most important. In June of 2018, GE announced plans to separate GE Healthcare into its own company, with plans to monetize 20% of the company and distribute 80% to shareholders tax-free. Then, in the company's 2018 10-K report, GE indicated plans to "retain the remaining portion" of the healthcare business following the sale of the biopharma wing. All of this is to say that the future of GE Healthcare is somewhat in flux at this point, though it will nonetheless play an important role in the future fortunes of GE. GE Healthcare posted revenues of just under $19.8 billion for 2018.
3. GE Power
The former bedrock of General Electric, GE Power is a wholly-owned subsidiary and remains the company's largest business division. GE Power produces systems that generate power using wind, oil, gas, and water, but the subsidiary has taken a sharp downturn in recent years, especially after the sale of GE Capital and the refocusing of General Electric's core business segments. GE Power posted revenues of $27.3 billion for 2018, down almost 22% from the figure from 2017.
GE power plants produce approximately one-third of the world's electricity.
4. Baker Hughes
GE Energy was divided into three subsidiaries: GE Power, GE Energy Connections, and GE Oil & Gas. In 2016, GE merged its Oil & Gas segment with Baker Hughes Incorporated in a deal valued at roughly $30 billion. When the merger was complete, the Oil & Gas segment represented GE's ownership interest of about 50.4% of the newly merged company. In total, GE owned about 62.5% of Baker Hughes at the time of the acquisition. The Baker Hughes acquisition in July of 2017 contributed more than $5 billion in revenue growth for the first half of 2018. However, as of 2019, GE has stated its intention to sell down the remainder of its stake in Baker Hughes in the coming months and years.
5. GE Renewable Energy
GE Renewable Energy, also known as GE Energy Connections, is the company's energy management division focused on the distribution, conversion, automation, and optimization of energy sources. By focusing on an area that promotes sustainability and increased efficiency, there is plenty of room to grow. GE Renewable Energy generated about $9.5 billion in revenue in 2018, which is roughly on par with the segment's revenue-generating capabilities from 2017 and 2016 as well.
As one of the largest conglomerates in the United States, GE maintains ownership over dozens of companies and subsidiaries across many different segments. In addition to the areas explored above, GE also offers products in segments related to aviation, transportation, lighting and more. The company also has a financial services operating segment, GE Capital.
In recent years, as it has faced declining stock prices and many other large-scale concerns, GE has been more likely to sell off portions of its business than to make new purchases. However, with a new team of leaders in the last several months aiming to address balance sheet issues, the company may be in the position to make new acquisitions before long.