GE Is Likely Planning To Sell Industrial Gas Engine Business
Zacks Investment Research | Feb 19, 2018 09:52PM ET
Per Reuters, after a series of setbacks in 2017 followed by the gradual fall in earnings and write-down in stock price, General Electric Company (NYSE:GE) is planning to divest its industrial gas engine unit for a consideration of $2 billion. Spinning off industrial gas engine business, including Jenbacher and Waukesha engines, will provide an opportunity for GE to streamline its power division whose profit came down 45% in 2017 due to a sharp fall in sale of power plants and services.
Amid this background, GE has possibly hired Citigroup Inc (NYSE:C). to prepare a sale process of its industrial gas engine business. Since the matter is confidential, none of the parties have come up with an official statement or have made any comment on it.
John Flannery, CEO of GE, had earlier disclosed that in the best interests of the company, there is a possibility of a spin off within even the core businesses of power, aviation and healthcare. As part of business turnaround strategy and to gain back investors’ loyalty, the company seems to put more money in higher revenue generating capacity segments which will help to improve its financial performance indicators in the long run.
Presently, the proposed unit for sale makes multi-ton gas turbines that generate on-site power to keep industrial plants running. Jenbacher and Waukesha engines have a range from 100 kilowatts to 10 megawatts that covers small and mid-sized segment of GE’s power business.
GE Power is the largest business segment of the company in terms of corporate revenues. However, the business has been a drag on earnings in the last few quarters as global demand waned with increasing popularity of renewable energy sources, overcapacity, lower utilization and fewer outages.
GE recorded lower margins in fourth-quarter 2017 due to headwinds in the Power and Transportation segments. Industrial segment operating profit decreased 39% year-over-year to $3,542 million with a decline in profits in Power (down 88%) and Transportation (down 40%), partially offset by a significant rise in profits in Renewable Energy (up 25%) and Healthcare (up 13%).
General Electric has underperformed the Zacks Investment Research
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