General Electric Stocks Gain 75% In November: What’s Next?
At the beginning of the 2000s, General Electric (NYSE: GE) used to be the largest public company with a capitalization of 600 billion USD. This was a conglomerate that tried to participate in all spheres of business, starting with credit cards and up to nuclear power plants. However, one mistaken placement made by the shareholders put an end to the era of GE.
In 2001, Jeffrey Immelt was made director-general of the company. Under his management, the company lost its place in the Dow Jones index, and the market is now discussing the growth of its stock price from 5 to 10 USD as if it were some minor company.
Today, we will discuss General Electric and whether to invest in it.
General Electric income
In November, the stock price of General Electric grew by 75%, stimulated by the results of the 3rd quarter.
- The revenue of the company reached 19.42 billion USD, which is 690 million more than expected;
- The profit per stock reached 6 cents, while experts had forecast a loss of 4 cents per stock;
- The losses decreased from 1.9 billion USD last quarter to 1.1 billion USD;
- The free money flow in the industrial segment amounted to 514 million USD, which was totally unexpected because experts had forecast a loss of 1.03 billion USD;
- The revenue from renewable energy sources grew by 2.3%. The Gas Power department also demonstrated a revenue of 7.6% higher, reaching 2.9 billion USD y/y;
- Only in the healthcare sector, dynamics were negative. The revenue shrunk by 7.3% to 4.57 billion USD, however, this result was still better than expected.
On the whole, the results turned out better than forecast. This attracted the attention of investors and provoked purchases. The quarterly report makes us think that the hardest period connected to the Covid-19 pandemics is over, and the company is recovering.
The influence of the pandemics on the GE Aviation and industrial orders
The most affected part of the GE business was aviation. The revenue dropped by 39% y/y. Since the beginning of the year, the number of orders from GE Aviation decreased by 50%. This department is forecast to remain the weakest one until the end of the year.
Industrial orders dropped by 31% y/y, and 75% of the decline is on the side of aviation.
Decreasing expenses by firing employees
To improve its financial performance, the company had to decrease its expenses tangibly.
About 20% of employees were fired in the aviation sector, which saved the company 1 billion USD. In the healthcare sector, 600 people were given sack in the third quarter. The management plans to go on firing employees by thousands of people, only the final digits are revealed nowhere. Anyway, this will save a lot of money.
Selling subsidiaries and losing the controlling stake
The company also needed to decrease the scale of its business, selling several subsidiaries.
For example, in 2020 it completely sold BioPharma for 20 billion USD. In three years, GE plans to sell the remaining stocks (377 million papers) of its oil-service giant Baker Hughes, thus losing its controlling stake.
In October, GE earned 400 million USD by selling the stocks of Baker Hughes. Among other purposes, the company uses the money for paying off debts. Since the beginning of 2020, the debt of GE decreased by 8.1 million USD.
The management plans to concentrate on aviation, energy, and renewable energy sources.
The vaccine will increase the number of orders in GE
When Pfizer (NYSE: PFE) and later Moderna (NASDAQ: MRNA) announced that the vaccine against the coronavirus would soon be ready, GE also felt the effect of the news because it produces engines for Boeing and Airbus SE that, in turn, assemble and sell airplanes to airlines. After vaccination begins, passenger flow will recover, the demand for airplanes will grow, which will be good for the income of companies producing corresponding equipment.
Permission to fly for Boeing 737 MAX 8
More good news for GE was the permission to fly for Boeing 737 MAX 8 that had been banned from flights since March 2019 all over the world.
On November 18th, the Federal Aviation Administration lifted the ban from Boeing 737 MAX 8. Now airlines will have to update software, amend the construction and hardware of the plane, and then will be able to use it in passenger transportation. Some 600 suppliers producing equipment for Boeing 737 MAX 8 were as happy as GE.
An increase in orders for wind power plants is expected
Also, a surge in orders for wind power plants is expected. Experts say that in the nearest 10 years, wind power plants will be producing 90 GW instead of 17 GW that they are producing now; wind power plants situated in the sea will produce 15% of this energy. As a result, GE invested 400 million USD in developing the most powerful sea wind turbine.
The current turbine named Haliade-X 12 has a power factor of 63% and produces more energy than any other turbine in the market. Improving it, the company will leave rivals far behind.
AI working with x-rays
GE is also an active participant in the coronavirus crisis. The GE Healthcare department announced that it was working on the first algorithm of artificial intelligence that will work with x-rays.
AI is used in the Critical Care Suite 2.0 system. One of the jobs the system does is helping doctors place endotracheal tubes in intubated patients.
Mobile x-ray equipment shows how well the tube needed for forced lung ventilation has been installed. Its placement might cost the patient their life. The pandemics make such patients numerous, so the equipment can save hundreds of people.
November was extremely productive for GE. It signed a lot of contracts in different countries. See the most interesting ones below.
In November, we heard of a contract signed between GE Power and DSEC for power points and engines for sea vessels of the US Department of Transportation. The contract brought the company 40 million USD.
The new type of ship will be fully electrified by the most modern technology of sea commerce. The propulsion system currently used for vessels unites generators, diesel engines, transformers, rowing motors, and support systems.
The vessels will be mostly used to explain high-tech to cadets in the sea.
Another contract in November was signed by GE Electric. It was a contract with South-Korean Naepo Green Energy Co., Ltd. For new equipment for central heat supply station in South Korea. The station will be modernized, and old equipment working on solid fuel will be replaced by gas turbines.
European Energy chose General Electric as a supplier of 3 wind power plants that will be built in Lithuania. The agreement also includes a contract for full maintenance of the plants for 25 years.
The Albany international airport also turned to GE. Now the application by GE Aviation will provide passengers with information about clean-ups of facilities. The info will be available via a QR-code.
The director-general of GE plans to introduce this app to taxis, planes, and other airports.
In November, GE also signed a contract with Guangdong Energy Group (China). By the agreement, GE will supply 3 super powerful turbines for the Dongguan electric power plant, which will make it the most powerful gas electric power plant in mainland China.
Spanish RED ELÉCTRICA DE ESPAÑA also decided to buy some equipment from GE. The latter agreed on supplying 10 mobile gas electric stations for the electrification of the Canary and Balearic Islands. This technology will be used in Spain for the first time.
As you see, November was extremely active and positive for GE. Now let us wait for the results of these activities that might again exceed expectations.
General Electric stock price tech analysis
The quarterly report provoked a surge in the stock price, which led to a breakaway in the 200-days Moving Average and a change in the trend for an ascending one. However, the price went on growing so intensely that they are now looking overbought. This idea is supported by the Stochastic that rests in the overbought area.
General Electric stocks are good for investing, however, I advise waiting for a correction to the nearest support levels of 9.50 and 8.50 USD and buy on bounces off these levels.
General Electric income is at its lowest of the last 6 years. We can say that GE has reached the bottom.
On the other hand, the income is showing positive dynamics compared to the previous quarter, which means we can hope for further growth.
The only danger is that someone knocks from below.