For many investors, analyzing General Electric (GE) has been like trying to solve differential equation in the dark. That’s because the company is so complex that figuring out the sum of all its parts can feel like an impossible task. The key word there is “feel” because it’s just really, really difficult, not impossible. And we get a little bit of light every time one of its competitors sells or spins off one of its businesses, which is happening quite frequently as industrial companies of all stripes continue shed businesses to focus on their cores.
Case in point: Over the weekend, Siemens (SIEGY) announced plans for an initial public offering of its Healthineers business, one that could be valued between $32 billion and $38 billion. General Electric has a health business too, notes Melius Research analyst Scott Davis, and the Siemen’s deal points to an enterprise value between $48 billion and $57 billion for GE Healthcare, and the unit could be worth closer to the high end of that range given that a quarter of the business is the high-margin Life Sciences unit, which is a rapidly growing, cash generator. Such a sale would “instantly plug the balance sheet and/or pension holes and leave plenty for a nearly offsetting EPS buyback,” Davis writes.
In short, General Electric has a whole lot of problems, including fallout from a potential tariff-sparked trade war. But Davis is one of those rare birds on Wall Street that has a Buy rating on the stock. He thinks the shares are worth $27.
If only investors could see the light.
Shares of General Electric are little changed at $14.51 at 11:26 a.m. today, while Siemens has ticked up 0.1% to $65.15. The Industrial Select Sector SPDR ETF (XLI) has ticked up 0.1% to $76.47.