After getting trounced in the Great Recession, General Electric (GE) is beginning to look like the GE of old — an industrial powerhouse.
GE has already made progress shrinking its financial arm, GE Capital. Those efforts continue as the company announced back in November that it would be spin off its North American consumer finance/credit card unit through a transaction that will include both a tax-free spin-off to existing shareholders and an IPO. The key is that GE plans to use the proceeds of the sale to strengthen its industrial operations.
GE CEO Jeffery Immelt has already pledged to make industrial operations a bigger piece of GE’s earnings and profits. That shift in strategy seems to be working as GE’s industrial operations have continued to add more to the firm’s bottom line in recent quarters. General Electric’s fourth quarter operating earnings saw a 20% bump versus the prior year’s quarter. The driver was expanding margins at its oil & gas, power and aviation businesses.
With GE’s focus now back to basics, the time has never been better to own GE stock. With a forward P/E of 14 and dividend of 3.0%, GE stock is still looking pretty cheap.