Contrarian Value Ideas

[gfp927z]

>>> GE Stock Falls On Reverse Split As Massive Unit Sale Confirmed


Investor's Business Daily

by APARNA NARAYANAN

03/10/2021


https://www.investors.com/news/ge-stock-investor-day-2021-outlook/?src=A00220


General Electric (GE) confirmed a $30 billion deal to sell its aircraft-leasing business and backed a reverse stock split, kicking off an investor day Wednesday. GE stock fell.

The sale of GE Capital Aviation Services (GECAS) to Ireland's AerCap Holdings (AER) means the industrial giant will shed the biggest remaining slice of GE Capital, which will cease to be a separate stand-alone business.

The move also speeds up GE's turnaround, allowing it to slash its debt by $30 billion. It's also one of the biggest deals in GE's multiyear restructuring, following sales of the biotech unit, light bulb business, and a majority stake in its oil field services segment.

Under the terms of the GECAS sale, GE will receive $24 billion in cash and 111.5 million shares, or the equivalent of a 46% stake in the combined entity. GE will also get another $1 billion from when the transaction closes in about nine to 12 months.

Separately, GE's board also recommended a 1-for-8 reverse stock split and a "corresponding proportionate reduction in the number of authorized shares." The reverse split will shrink the amount of outstanding GE stock to about 1.1 billion shares from 8.8 billion.

Those actions are meant to adjust the number of outstanding shares in line to be more in line with companies that have comparable market caps, GE said.

Management will seek shareholder approval for the stock split at GE's annual meeting on May 4.

GE Stock

Shares sank 6.5% to 13.09 on the stock market today. GE stock is still extended off a 12.01 three-weeks-tight entry and an alternative entry around 11 off support at the 10-week line, according to MarketSmith chart analysis. The relative strength line for GE stock has pulled back from a recent high.

Shares of jet-engine rival Raytheon Technologies (RTX) rose 0.7% Wednesday, and aerospace supplier Honeywell (HON) added 1.4%. AerCap fell 4.7%.

GE also backed its full-year earnings guidance, though it will take a $3 billion non-cash charge in Q4 related to the GECAS sale. In January, GE predicted adjusted 2021 EPS of 15-25 cents, which is largely below the current consensus for 24 cents a share.

Meanwhile, updates to other metrics like industrial free cash flow will be watched during the investor day as the improving economy and loosening pandemic restrictions benefit key business GE Aviation.

Key customer Boeing (BA) has resumed deliveries of its 737 Max and is taking orders again after regulators cleared to plane to carry passengers.

<<<