I am adding GE as well (been wrong on this one but position size was moderate). Ge still dominate in GE aero engines, Power (business is down, but their market position is #1 and health care. Energy is now earning zip, but is a fixer upper and worth $20B in market cap. locomotives and Lighting are too small to matter but worth a few billion. Locomotives are quite profitable and have a very strong market position in the US, but the business is in a trough.
GE financial has ~$35B in equity and $150B in assets, which in itself seems well capitalized. I would think it may be worth around book. Industrial debt is a only round $10B plus the afformentioned $38B in Pension deficit.
I don’t think that GE is broken. They have a dominant market position in 3 markets and are #1 in Power and Engines and probably second in health care where they oersted. This is the stereotypical GE business model. They are #3 in energy, which is under earning, but certainly worth something (the market implies $20B) and had a net debt of zero.
GE needs to slash headquarter cost. Aerospace has bad cash flow, because they sell a lot of engines at a loss, but the profits will flow for decades on service and spare parts for each 9ne sold, so I don’t think it is a problem. Same problem than Rolls Royce, which has recovered nicely and GE Aero is better tun than RR.
Flannery just need to make this elephant mean and nimble again. |
