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GE Stock Is a Buy Here as Culp’s Strategy Starts Paying Off


Larry Culp became CEO of General Electric (NYSE:GE) in 2018 because of his experience with Danaher (NYSE:DHR). GE stock is now benefitting from that experience.

The General Electric (GE) logo on a building
Source: Sundry Photography / Shutterstock.com

Culp ran Danaher for nearly two decades. He transformed it through acquisitions into a very successful medical conglomerate.

The hope was he could graft that strategy onto GE, which had failed as a power play under former CEO Jeff Immelt.

After years of fighting to save the company from Immelt-era damage, the Culp plan is bearing fruit. GE shares are up 43% over the last two years, despite a 1:8 reverse stock split that took the price of a share over $100. GE stock trades today at about $103.

Evidence for the new era is GE’s recent purchase of BK Medical for $1.45 billion. 

BK does surgical visualization. That means it provides internal images of patients during surgery, which can make it more accurate.

It’s a fast-growing niche, and BK became a fast-growing company under private equity ownership. The hope is that, by combining it with GE’s existing ultrasound technology, and GE Healthcare’s sales force, it can grow even faster.

This is Culp’s third medical acquisition, and the first priced at over $1 billion. In late 2020 GE bought Prismatic Sensors, which specializes in photon-counting detectors. In May it bought Zionexa, specializing in neurology and oncology biomarkers. All these deals are small relative to GE’s power businesses, but they give it a new direction.

Culp continues to seek buyers for the power operations, especially the French turbine business. Immelt’s managers called France-based Alstom GE’s “best deal in a century” back in 2015. For Boston-based GE, it was like selling Babe Ruth to the Yankees.

Immelt’s power deals nearly destroyed GE. They certainly destroyed GE’s legend as the last survivor among the original Dow stocks. GE was dropped from the Dow in 2018.

Between 2016-2020 it shrunk 20%. Last year it shrank another 15%. Based on its first two quarters it was on track to drop by 13% more in 2021.

A Closer Look at GE Stock

Culp’s most important achievement has been reining in the comapny’ss huge debt. That dropped from over $90 billion in 2018 to less than $74 billion at the end of 2020. It had dropped by another $11 billion in June, to $62.3 billion. 

There is still work to do. Even rumors of GE selling power units can improve the stock. The power it’s keeping is renewable energy, using 3D printing techniques to produce giant, more efficient turbines.

The recent run-up in oil prices will help its transition. GE is also looking to improved results from its jet engine business with new defense contracts.

Culp originally signed to make $230 million in stock options if he achieved set goals. He forfeited his salary and bonus during the pandemic, then took $100 million in options that vest in 2024 to stay on.

An NBA forward drafted in 2018 recently signed a contract worth $207 million over five years and you probably never heard of him. No, don’t shoot GE’s board.

The Bottom Line

Over the last year, GE shares are up 113%. Compare that to Danaher, Culp’s alma mater, which is up 53%.

Under Culp GE has a clear strategy, a clear direction. Analysts are expecting a profit when the current quarter is announced Oct. 26, maybe even some growth.

Technical indicators are positive, and only 1% of shares were recently being held short. At Tipranks, GE is considered a moderate buy with seven of the remaining 11 analysts telling clients to buy it.

GE isn’t great again, but it’s alive and, under Culp, it knows where it’s going. That’s what Larry Culp was hired to do, and that’s what he has done. GE is an investment here.

On the date of publication, Dana Blankenhorn held no positions in companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Living With Moore’s Law: Past, Present and Future available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Tweet him at @danablankenhorn, connect with him on Mastodon or subscribe to his Substack.

Article printed from InvestorPlace Media, https://investorplace.com/2021/10/ge-stock-is-a-buy-here-as-culps-strategy-starts-paying-off/.

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