Shares of industrial giant General Electric (GE 0.68%) soared by 18.5% in February, according to data from S&P Global Market Intelligence. The move comes from a well-received set of fourth-quarter earnings at the end of January and positive guidance for 2024.
Equally importantly, GE issued a Form 10 with the Securities and Exchange Commission to register the securities of GE Vernova for trading in the United States. GE Vernova is a power, wind energy, and electrification business set to be spun off on April 2.
General Electric has come a long way
The company is far from the tumultuous period of 2017 and 2018, when soon-to-be short-term CEO John Flannery replaced long-term CEO Jeff Immelt and then ultimately current CEO Larry Culp in 2018. The company's very ability to survive was under question back then.
However, Culp has engineered a slow transformation involving asset sales, debt reductions, strategic deals, and an ongoing emphasis on improving operations by implementing lean management techniques.
In addition, and a fact not often discussed, GE has significantly improved the transparency of its reporting. That's something former CFO Carolina Dybeck Happe can also take credit for, notably when compared with her two predecessors, Jamie Miller and Jeff Bornstein.
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GE's guidance
That greater transparency came into the fold when management gave revenue, profit, and cash flow guidance for both GE Aerospace, the remaining company after the GE Vernova spin takes place, and GE Vernova. While that might not seem a big deal, compare it with fellow industrial giant 3M, whose investors are still in the dark over many details over the guidance of the remaining 3M company and its forthcoming healthcare spinoff, Solventum.
In a nutshell, GE expects another year of double-digit revenue growth at GE Aerospace and mid-teens profit growth, excluding corporate and standalone costs resulting from the spinoff.
Meanwhile, GE Vernova is expected to generate free cash flow in 2024, with two of its three segments -- power and electrification -- continuing to contribute solid profit, while the wind power business works through less profitable legacy contracts in offshore wind, having already returned the onshore wind business to profitability.
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GE Aerospace and GE Vernova in 2024
Culp's tenure began in October 2018, and the company's share price has doubled since then. In addition, management has achieved its aim of breaking up and delivering three businesses with investment-grade debt. (GE Healthcare was spun off in early 2023.)
With GE Aerospace and GE Vernova set for good profit growth in 2024, the GE name will end positively, and investors warmed to that reality eventuality in February.
