Industrial Share of Earnings will continue to grow? GE made a major strategic shift by announcing plans to refocus its industrial operations.

GE announced that it will create a simpler, more valuable company by reducing the size of its financial businesses through the sale of most GE Capital assets and by focusing on continued investment and growth in its world-class industrial businesses. As a first step, GE also announced agreements to sell the bulk of GE Capital Real Estate assets for a total value of approximately $26.5 billion.

It is announced that GE and its Board of Directors have determined that market conditions are favorable to pursue disposition of most GE Capital assets over the next 24 months except the financing “verticals” that relate to GE’s industrial businesses.  Under the plan, the GE Capital businesses that will remain with GE will account for about $90 billion in ending net investments excluding liquidity – about $40 billion in the U.S. – with expected returns in excess of their cost of capital.

Key financials related with announcement:

  • High-value industrials to comprise more than 90% of GE earnings by 2018
  • Plans to retain financing “verticals” that relate to GE’s industrial businesses
  • Announces sale of GE Capital Real Estate assets for approximately $26.5 billion
  • Will work with regulators to terminate GE Capital’s SIFI designation
  • GE to take approximately $16 billion after-tax charge in 1Q’15, $12 billion non-cash
  • Industrial businesses remain on track for operating earnings per share of $1.10-$1.20 in 2015, in line with expectations
  • GE expects to get approximately $35 billion in dividends from GE Capital from this plan
  • Board authorizes new buyback program of up to $50 billion

 

Although nearly 50% of revenues came from GE Capital in 2000, GE Capital’s shares in total revenue decreased to 28% in 2014. On the other hand, energy division share reached to 35% from 10%.

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