General Electric Company (GE): Investors Skeptical of the Big Transition

With the recent acquisition of power and grid division of the French energy firm Alstom SA (EPA:ALO) and plans to spin-off its credit card division to downsize the company’s financial arm, GE Capital, it’s clear that General Electric Company (NYSE:GE) is in the middle of a big transition.

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“Mr. Immelt is really accelerating the rate of change in the portfolio. With the three transactions that are going on, that’s going to change the composition of total revenues by over 15%,” Jack DeGan of Harbor Advisory Group said on CNBC’s Nightly Business Report.

The program focused on the effects the recent transitions will have on General Electric Company (NYSE:GE) and its shareholders.  After the Alstom SA (EPA:ALO) deal is complete, 75% of General Electric Company (NYSE:GE) earnings will be impacted by its industrial businesses by the end of 2016. It’s a large bet on Energy and Europe that is expected to increase to the earnings. General Electric Company (NYSE:GE) is also planning to raise $3.25 billion from the spin-off of its credit card unit in an IPO, later this year. For the investors all these transitions in different units of GE create a headwind for the stock in the near-term, especially till the Alstom SA (EPA:ALO) deal is finalized.

Speaking on the same program, David Seaburg of The Cowen Group that the stock of General Electric Company (NYSE:GE) is overvalued. Mr. Seaburg said: “I generally wouldn’t be a buyer in the stock at these levels. Plain and simple, there is too much risk from an execution perspective”

Art Hogan of Wunderlich Securities is more optimistic about the company’s future. According to him General Electric Company (NYSE:GE) expansions in the energy market were a mirroring of how the economy is shifting.

General Electric Company (NYSE:GE) came with its second quarter results on Friday. The earnings of the company increased by 13% to $3.55 billion, or 35 cents per share, from $3.13 billion, or 30 cents per share, in the same quarter a year ago. The Company’s oil & gas and aviation units grew their profits in the second quarter, while its healthcare business showed weak results as hospitals bought less medical equipment.

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