General Electric Company GE yesterday communicated that it plans to exit from the new build coal power business and concentrate on the rest of the power generation and renewable energy businesses.
On the same day, the conglomerate’s unit, GE Renewable Energy, announced to have finalized contracts to supply Haliade-X wind turbines at the Dogger Bank Wind Farm. Financial terms of the contract were not disclosed by the parties involved.
It is worth noting here that General Electric’s share price decreased 7.7% on Sep 21, eventually closing the trading session at $6.35.
Inside the Headlines
The company’s new build coal power business is part of Power Portfolio’s Steam Power business. Notably, Power Portfolio comes under the ambit of General Electric’s Power segment — which also includes Gas Power. In second-quarter 2020, the Power Portfolio’s revenues declined 21.4% year over year. Orders for steam equipment were down in the quarter.
Elaborating on the exit plan, General Electric wishes to carry on the exit process — which is currently subject to consultation requirements — through job adjustments, divestitures, consideration for subsidiaries (publicly-held) and site closures. Beside this, the company will ensure fulfilling its commitments to existing customers by helping them run their plants effectively.
As noted, the exit decision will allow General Electric to work on better growth opportunities in the power generation business. This, in turn, will enable the company to ensure better affordability, accessibility, sustainability and reliability of electricity. Also, Steam Power will continue to provide products and services to the nuclear market.
In addition to the aforementioned exit plan, GE Renewable Energy announced that it will supply each of Dogger Bank’s two phases — Dogger Bank A & B — with 95 units of Haliade-X 13 MW winds turbines. In addition to the supply contract, Renewable Energy will be providing operational support to the turbines for five years as per the terms of the Services and Warranty agreement.
Notably, Dogger Bank Wind Farm — a joint venture between Equinor ASA EQNR and SSE Renewables — is situated in the northeast coast of England. The wind farm will be developed in three phases and will be the biggest offshore wind farm upon completion in 2026. Its combined installed capacity will be 3.6 GW of electricity.
Zacks Rank, Price Performance, Estimate Trend and Industry Players
General Electric currently has a market capitalization of $60.2 billion and a Zacks Rank #4 (Sell). The company is facing headwinds in its Healthcare, Power and Aviation segments amid the pandemic. However, measures to deal with the pandemic-related problems, restructuring actions and healthy liquidity are expected to be helpful.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past 60 days, General Electric’s bottom-line estimates for 2020 and 2021 have been revised downward. Currently, the Zacks Consensus Estimate is pegged at a loss of 5 cents for 2020 and earnings of 29 cents for 2021, reflecting declines from the respective 60-day-ago figures of earnings of 1 cent and earnings of 36 cents.
General Electric Company Price and Consensus
General Electric Company price-consensus-chart | General Electric Company Quote
The company’s share price has decreased 9.3% in the past three months compared with 7% growth recorded by the industry.
Two companies in the same industry, 3M Company MMM and Honeywell International Inc. HON have recorded growth of 2.2% and 11.4%, respectively, in the past three months.
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