It’s known to have distributed electricity to U.S. houses and brought appliances to their kitchens, but as General Electric has gone from Thomas Edison to jet engines to being kicked out of the Dow, it has become an industrial powerhouse and an iconic American company with its spirit of invention being its guiding force throughout its 129-year history.
Having weathered some of its worst years in recent history, the company has had a solid year with its stock rallying, adding about 22% for the first quarter 2021. Operating worldwide through its four industrial segments, Power, Renewable Energy, Aviation and Healthcare and with a worldwide customer reach of 170 countries, General Electric is expected to carry on pushing the boundaries of science, technology and manufacturing to move, power, build and cure the world.
A brief history of General Electric
A name synonymous with light bulbs, televisions and washing machines, General Electrics was born out of the race to provide affordable electricity and to fuel the growth of industrial America. The company we know today was founded in 1892 through the merger of the Edison General Electric Company and the Thomson-Houston company, which brought together two of the largest businesses in the fledging electrical industry.
By 1900, the newly formed General Electric established a research laboratory where many of its earliest products like incandescent light bulbs, early x-ray machines, an electric locomotive and an electric stove were developed by in-house scientists. In the 1920s, General Electric began mass-producing electric home appliances and was soon credited for changing the landscape of the American home, while it produced one of the largest lines of goods in the world, particularly through its General Electric and Hotpoint brands.
Known for being a company of firsts throughout most of its existence, in the years that followed it developed vacuum technology that eventually enabled the invention of the microwave and radar systems, while during World War II, it supplied the military with executives and equipment manufacturing, introducing the J-47 in 1949, which has been dubbed the most popular jet engine in history. Then, during the 1960s and 1970s, General Electric was a pioneer in laser light technology and medical imaging, developing a scanner that could make sharp, cross-sectional scans of a patient in less than five seconds.
Through a series of mergers and acquisitions, the industrial titan began branching out to other sectors so much so that when chemical engineer John F. Welch assumed the top spot in 1981, the company acquired RCA and NBC, expanding into the financial services sector. By 2000, General Electric had become a conglomerate, acting as a lender, appliance maker, media giant – thanks to its stake at NBCUniversal which it eventually sold to Comcast – while it tapped into the healthcare business.
But as it celebrated its 125th anniversary in 2017, General Electric was struggling to stay afloat and was fighting tooth and nail to weather the storm. Eventually, by 2019, the stock was up approximately 50% for the year, thanks to significant improvements like reducing debt and selling off stakes and subsidiaries that were no longer core to the company’s model.
Since 2018, the company has been operating through its Power, Renewable Energy, Aviation, Healthcare and Capital segments. The Power segment offers technologies, solutions and services related to energy production, like gas and steam turbines, generators and power generation services, while the Renewable Energy segment provides wind turbine platforms amongst other products and services to the hydropower industry. On the other hand, the Aviation segment supplies jet engines and turboprops for commercial airframes, maintenance, component repair and overhaul services, as well as engineering services. The Healthcare segment provides healthcare technologies in medical imaging, digital solutions, patient monitoring, biopharmaceutical manufacturing technologies and performance enhancement solutions. Lastly, the Capital segment leases and finances aircraft, aircraft engines and helicopters, amongst other solutions.
A company that has received numerous accolades, in 2011, General Electric ranked among the Fortune 20 for being one of the most profitable businesses, while it has been a Fortune 500 company, in other words, one of the largest firms in the U.S. by gross revenue for 21 years. Impressively, two former GE employees, Irving Langmuir and Ivar Giaever have both been awarded the Nobel Prize for physics and chemistry respectively.
When during the financial crisis of 2008, the industrial giant’s financial arm was suffering from the credit crunch, Warren Buffet stepped in and invested $3 billion into the company to stabilise its operations. In exchange, he received $3 billion in preferred stock paying a 10% annual dividend. His Berkshire Hathaway company raked in about $1.5 billion from the deal.
When did General Electric go public?
General Electric debuted on the New York Stock Exchange (NYSE) in 1896. Interestingly, the company was one of the original 12 listed in the then newly formed Dow Jones industrial Average (DJIA), where it remained a part of the index from 1907 to 2018, the longest continuous presence of any company on the index.
The General Electric stock has split several times throughout its history, undergoing a 2-for-1 split in 1971, 1983, 1987, 1994 and 1997 respectively. The splits meant that for each share owned pre-split, shareholders would now own 2 shares, so a 1,000-share position pre-split, would become a 2,000-share position. Then, in 2000, the stock underwent a 3-for-1 split, which means that for each share owned pre-split, a shareholder now owned 3 shares.
On March 10, 2021, the company announced that its board of directors are recommending a 1-for-8 reverse stock split due to the conglomerate’s significant transformation over the past several years. The split would effectively multiply GE’s stock price by eight, while reducing the number of shares outstanding to a number the company said is more typical of companies with comparable market capitalization. So, an investor with 8,000 shares would end up with 1,000 shares. Reverse splits take place for several reasons amongst which include preventing a company from delisting from a major exchange or attracting big investors.
Is General Electric a buy?
A share of the General Electric stock had until 2017, been a solid investment, returning steady dividends, however, in November of the same year, the firm announced plans for a broad restructuring and halved their quarterly dividend from 24 cents to 12 cents, eventually cutting it down once more in December 2018 to 1 cent a share as it was struggling with plunging profits and cash flows.
The stock peaked at $13.26 prior to the COVID-19 pandemic sell-off, which pushed the stock back down to its lowest point over the past five years to $5.48 in March 2020. However, the stock has rallied, adding about 25.5% since the beginning of the year, while the S&P 500 has gained 11.3%%.
The conglomerate has shown signs of improvement by undergoing sell-offs of its non-essential business, as well as reducing its debt. In its most recent earnings report on April 27, 2021 the company’s Q1 earnings surpassed estimates at $0.03 per share, beating the Zack Consensus Estimate of $0.014 per share.
And sentiment towards the company has also changed. When at an investor event in March 10, it announced a $30 billion deal to merge its aircraft-leasing unit with AerCap, the stock went from trading over $14 per share to briefly dipping below $12 a share in after-hours trading. However, after Wall Street defended the jet-leasing deal, the stock rallied surging 6% five days after the announcement.
What’s next for General Electric?
As General Electric is turning its fortunes around, the real drivers of progress this year are expected to be its aviation and power segments. Aviation is forecasted to grow at the low-single-digit rate this year and the next. Its margin this year should approximately match last year’s figure, while power, meanwhile, will see improvements in both sales and margin despite the fact that in 2019, the segment generated free cash flow of -$1.5 billion. This is expected to turn positive some time in 2021.
Meanwhile, the conglomerate has carved out the largest market share in a record-breaking year of global wind capacity additions. Undeterred by the COVID-19 pandemic, 2020 saw nearly 100GW deployed, with global commissioning of new wind turbines up 59% compared to 2019. General Electrics earned claimed the top spot together with Goldwind in this year’s ranking by increasing its onshore installations by 6.6GW year-on-year, as installations in the U.S. accounted for some 70% of its 13.5GW global portfolio.
As the global economy opens up and lockdowns are lifted in phases, consumer demand is expected to pick up and with it demand for General Electric’s products and services.
How to invest in General Electric?
Ready to buy a share in General Electric (GE)? Your first step to tapping into a world of investment opportunities with CCTrader is to sign up and open an account.
To do so:
- Download the app from either Google Play or the Apple App Store. Alternatively, you may access CCTrader on your desktop by visiting https://live.cctrader.com/
- Once you’ve onboarded successfully and have funded your account, head over to the search bar at the top of your screen and input either the company name or ticker symbol.
- Select the instrument of your choice from the list and then click on the Buy button on the window located at the bottom of your screen.
- On the New Order page, input the number of shares you would like to purchase and hit the Place Buy Order. GE has been added to your portfolio.
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