General Electric is deep in its turnaround efforts.
The industrial conglomerate announced Wednesday it would merge its aircraft leasing unit with Irish company AerCap in a deal worth $30 billion, the latest move to streamline the company and unload debt from its balance sheet.
In an interview with CNBC, CEO Larry Culp said: “GE shareholders should be delighted with this transaction. With a $30 billion headline, what we’re able to do here is bring cash in … which will allow us to put that toward additional debt reduction.”
Michael Binger, president of Gradient Investments, applauded the company’s efforts to right the ship.
“Culp and his predecessor Mr. Flannery have done a great job in their restructuring here. They’ve had four tasks: they’re shedding assets, they’re paying down debt, they’re focusing on their core businesses and they’re getting their underfunded pension fund healthy. I think as GE gets smaller and smaller, the market is going to like it more and more,” Binger told CNBC’s “Trading Nation” on Wednesday.
Other recent efforts include GE’s sale of its biopharma business to Danaher and its majority divestment of oil company Baker Hughes.
Investors did not rally on the AerCap deal, though. GE shares tumbled 5% on Wednesday after the company also released full-year earnings guidance on the soft side.
Binger, while confident in the restructuring plans, does not see the stock as a buy here, either.
“Being cash flow positive is good, focusing on core positives is good, and getting down to a targeted EBITDA-to-debt level is good, but after the stock has doubled, we would not be buyers here. We would wait for lower prices before we stepped in,” he said.
GE’s shares have rallied more than 120% in the past six months, hitting a fresh 52-week high as recently as this week.
Quint Tatro, president of Joule Financial, is also wary of putting money to work in the stock.
“General Electric keeps shedding businesses, albeit with good intentions to shore up that balance sheet, but they’re doing it in sectors and environments that are finally turning around. We’re seeing energy turn around. We’re seeing aircrafts coming out of Covid and the quarantine, and people are going to be traveling. So they’re selling business that I think they could be benefiting from,” Tatro said in the same interview.
He added that there are far better places for investors to look to instead of GE.
“I just don’t think it’s worthy of capital here, there are too many other options. Even though it looks cheap, among a variety of metrics, I think investors need to steer clear,” Tatro said.
