General Electric (GE, Financial) has finalized its ambitious transformation, a process initiated three years ago, culminating in the creation of three distinct entities: GE Aerospace (GE), GE Vernova (GEV, Financial), and GE HealthCare (GEHC, Financial), with the latter having been spun off in January 2023. This strategic move marks the completion of GE's massive overhaul, aiming to enhance focus and growth in each specialized sector.
Larry Culp, transitioning to lead GE Aerospace, has steered the company towards leveraging the booming commercial airline industry and increasing defense budgets globally. This focus has significantly benefited GE, evidenced by an 84% year-over-year surge in share price, driven by the aerospace sector's strong demand and a revival in the power and energy segments.
GE Vernova, now trading under the ticker symbol "GEV," embodies the power and renewable energy ambitions of the original conglomerate and has been met with positive investor sentiment. Both GE and GEV have shown impressive financial recoveries, with GEV demonstrating its strength on its first trading day.
The renewable energy sector, particularly wind turbines, has seen a resurgence, partly thanks to the Inflation Reduction Act passed in August 2022. This has led to a 14% revenue growth in renewable energy and a significant reduction in operating losses. Similarly, the power segment reported a 12% revenue increase and substantial profit, buoyed by the demand for gas turbines.
Looking ahead, both GE and GEV are poised for growth. GEV is projected to achieve $34-$35 billion in FY24 revenue, with expectations of mid-single-digit organic revenue growth and a 10% EBITDA margin by 2028. GE anticipates low-double-digit revenue growth and operating profits between $6.0-$6.5 billion in FY24, with a high-single-digit CAGR expected through 2025-2028.
The division of GE into three focused companies has not only been a bold strategic move but also a successful one, unlocking significant value and setting each entity on a path of tailored growth and innovation.
