Venerable General Electric (GE), once the longest-serving member of the Dow Jones Industrial Average, will officially split into two companies at the start of next month.
And the old GE name is going away.
GE will spin off GE Vernova on April 2, which will then start trading on the New York Stock Exchange (NYSE) under the ticker GEV. Holders of GE common stock will receive one share of GE Vernova common stock for every four shares of GE common stock held as of March 19.
Importantly, GE shareholders will continue to hold their shares of GE common stock – but now with the company name GE Aerospace, GE said in a press release. Meanwhile, GE Aerospace will continue GE's listing on the NYSE under the ticker symbol GE.
GE Vernova houses the former conglomerate's gas power and renewable energy business. GE spun off GE HealthCare Technologies (GEHC) in January.
GE first announced its decision to split into three companies focusing on aviation, healthcare and energy, respectively, in 2021.
Better times for GE stock?
GE stock is a long-time market laggard, but it has clobbered the broader market over the past year – and especially since its board set the GE Vernova spin-off date.
If you go back two decades, GE sports an annualized total return (price change plus dividends) of just 2%. The S&P 500 generated an annualized total return of more than 10% over the same period. Over the past 10 years, GE lagged the broader market by about 11 percentage points.
But GE's decision to split up helped change sentiment on the name. Its price performance is much more encouraging since it decided to split, with upside accelerating as the spin-offs came to fruition. GE's annualized total return easily tops the S&P 500 over the past five years, and doubles the broader market's returns for the trailing three-year period.
Cut to today, and GE has been clobbering the broader market. Shares are up 85% on a price basis over the past 52 weeks, vs 26% for the S&P 500. For the year-to-date, GE is sitting on a 25% price gain, vs the broader market's 7%.
Even better, Wall Street likes the "new" GE's prospects as GE Aerospace going forward.
Of the 17 analysts covering the stock surveyed by S&P Global Market Intelligence, five call it a Strong Buy, two say Buy, six have it at Hold and three rate it at Sell. That works out to a consensus recommendation of Buy, with solid conviction.
Bulls argue that GE Aerospace has significant advantages over rivals, among other reasons to be constructive on the stock.
"Comparing its engine business vs its closest peers, we continue to see GE outperforming in the coming years," writes Morgan Stanley analyst Matt Akers, who rates the stock at Overweight (the equivalent of Buy). "GE's commercial engine fleet is approximately three times larger than its competitor's, giving it a bigger base to spread costs."
The analyst adds that GE's commercial engine fleet stands out vs peers due to better demographics. "Nearly two-thirds are mid-life engines in their prime aftermarket period," Akers notes.
