General Electric Share Forecast November 2021 – Time to Buy GE?

Shares of American multinational conglomerate General Electric (NYSE: GE) are in the green today after closing at $111.29 as of November 9^th (22:50 EST). The company has announced plans to split into healthcare, aviation and energy conglomerates. Reacting to the news, GE shares were up by 7% on Tuesday morning.

General Electric – Technical Analysis

General Electric’s financial statement indicates that the market cap is $122.212 billion with total assets worth $237.133 billion.  Revenue for 2020 was at $79.89 billion with a profit margin of 6.97% compared to $95.06 billion in 2019.

Oscillators for GE such as Relative Strength Index (14)(64.97), Stochastic %K (14, 3, 3)(69.14),  Commodity Channel Index (20)(233.00), Average Directional Index (14)(20.85) and Oscillator(3.14) are neutral. Moving averages such as Exponential Moving Average (10)(107.34), Simple Moving Average (10)(106.65), Exponential Moving Average (20)(106.16), Simple Moving Average (20)(105.54) and Exponential Moving Average (30)(105.52) are indicating a buy action.

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Recent Developments

The biggest news out of the company is the guidance changes introduced by the management, which lowered its full-year revenue outlook for 2 primary reasons. Growth in the healthcare and aviation sectors was held back by supply chain constraints. Supply chain issues are also negatively impacting its military businesses. The management has confirmed that growth in healthcare will particularly be affected in the first half of 2022.

However, GE’s management was able to raise margin guidance in spite of the supply chain pressures it was facing. The management team did a fine job of executing and reducing costs which has also led the company to benefit from favourable margin mix.  The company is able to maintain its healthcare margin guidance due to the self-help initiatives it took to reduce supply chain constraints. Cists for the year are expected to be around $1 billion for the year, which is better than their previous guidance.

General Electric has been experiencing a rough decade as debt affected the company’s growth. The build up of debt was mostly caused by an ambitious multi-year campaign to expand from its industrial roots into finance, media, and other sectors. The company now intends to break its aviation, healthcare, and energy businesses into three separate public companies. It will spin off its healthcare sector by early 2023. It will combine and then shed its renewable energy, power, and grid units as stand-alone businesses. The remaining sector will concentrate on aviation which will make it one of the world’s biggest jet engine businesses.

Should You Buy GE Shares?

Investors looking at GE should consider companies that have previously undergone splits, such as United Technologies’ split into three independents last year and Dow Chemical and DuPont’s megamerger that ultimately split into three units. Almost all of these efforts have been rewarded by the market, and the initial response from GE shares seems that it will be the same. However, GE is still a work in progress. The split can also temporarily distract management from work getting done and stop other units from performing to their fullest. However, following the split, the healthcare business and the aircraft-engine business will no longer have to fight internally for resources.

While GE will face more headwinds in 2022, the management is currently doing a great job of navigating them. On the other hand, year-over-year order growth of 42% in the quarter is evidence that GE’s problems are not so much matters of demand, but rather matters of working through supply chain constraints. Considering all of the above, GE investors should wait and see how the company is performing after the split before buying GE shares.

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