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General Electric Co GE

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Morningstar’s Analysis

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This Quarter Was Another Feather in GE Bulls’ Caps As We Slightly Raise Our FVE

Joshua Aguilar Equity Analyst

Analyst Note

| Joshua Aguilar |

Nothing in narrow moat rated General Electric’s results materially alters our long-term thesis. In fact, GE outperformed our expectations in power and renewables, performed mostly in line with our expectations for healthcare, but slightly lagged behind our expectations in aviation. We slightly bump up our fair value estimate to $15.90 from $15.70 in what we see as a solid quarter confirming our bullish view. As a reminder, we see multiple potential remaining catalysts including the AerCap-GECAS merger, which has received regulatory and AerCap shareholder approval; a potential monetization of healthcare; a potential ringfencing of insurance; a potential raised earnings guide as the year progresses; and of course, material progress toward a high-single-digit free cash flow yield, which could come in ever higher over the long term and quicker than the market appreciates.

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Company Profile

Business Description

GE was formed through the combination of two companies in 1892, including one with historical ties to American inventor Thomas Edison. Today, GE is a global leader in air travel, precision health, and in the energy transition. The company is known for its differentiated technology and its massive industrial installed base of equipment sprawled throughout the world. That installed base most notably includes aerospace engines, gas and steam turbines, onshore and offshore wind turbines, as well as medical diagnostic and mobile equipment. GE earns most of its profits on the service revenue of that equipment, which is generally higher-margin. The company is led by former Danaher alum Larry Culp who is leading a multi-year turnaround of the storied conglomerate based on Lean principles.

5 Necco Street
Boston, MA, 02210
T +1 617 443-3000
Sector Industrials
Industry Specialty Industrial Machinery
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 174,000