General Electric shares gain the most since April 2015 as company announces health care unit spin-off, Baker Hughes stake sale

June 27, 2018 10:07 am

According to an announcement by General Electric Company (GE) on Tuesday, it has agreed to spin off its health care division and also intends to sell its stake in oil-services firm Baker Hughes, which would allow it to concentrate on power plants, jet engines and renewable energy.

General Electric shares closed higher for the second time in the past ten trading sessions in New York on Tuesday. It has also been the sharpest daily surge since April 10th 2015. The stock went up 7.76% ($0.99) to $13.74, after touching an intraday high at $13.94, or a price level not seen since June 13th ($14.05).

Shares of General Electric Company have retreated 21.26% so far in 2018 compared with a 1.85% gain for the underlying index, S&P 500 (SPX).

In 2017, General Electric’s stock plummeted 44.78%, thus, it again underperformed the S&P 500, which registered a 19.42% return.

The decision is aimed to bolster the industrial conglomerate’s balance sheet by diminishing debt and increasing cash. Meanwhile, GE’s shareholders are to be awarded 80% of the value of GE Healthcare as a tax-free distribution of shares, Reuters reported.

GE’s health care unit is expected to be spun off during the upcoming 12 to 18 months, while its stake in Baker Hughes – to be sold over the next 2 to 3 years.

“We are aggressively driving forward as an aviation, power and renewable energy company – three highly complementary businesses poised for future growth”, GE’s Chief Executive Officer John Flannery was quoted as saying by Reuters.

The US conglomerate said it had completed substantially its plan to divest $20 billion in assets, which leaves a “simpler and stronger” company focused on spurring its growth, operating profits as well as shareholder returns.

General Electric also said its industrial net debt was expected to be reduced by almost $25 billion by the year 2020. At the same time, the company intends to maintain a cash position of at least $15 billion on its balance sheet.

GE’s annual dividend of $0.48 per share will be kept until the health care unit spin-off is finalized, the company said.

According to CNN Money, the 15 analysts, offering 12-month forecasts regarding General Electric’s stock price, have a median target of $15.50, with a high estimate of $27.00 and a low estimate of $11.00. The median estimate represents a 12.81% upside compared to the closing price of $13.74 on June 26th.

The same media also reported that 11 out of 18 surveyed investment analysts had rated General Electric’s stock as “Hold”, while 5 – as “Buy”. On the other hand, 2 analysts had recommended selling the stock.

Daily and Weekly Pivot Levels

With the help of the Camarilla calculation method, today’s levels of importance for the General Electric stock are presented as follows:

R1 – $13.79
R2 – $13.84
R3 (Range Resistance – Sell) – $13.89
R4 (Long Breakout) – $14.04
R5 (Breakout Target 1) – $14.22
R6 (Breakout Target 2) – $14.30

S1 – $13.69
S2 – $13.64
S3 (Range Support – Buy) – $13.59
S4 (Short Breakout) – $13.44
S5 (Breakout Target 1) – $13.26
S6 (Breakout Target 2) – $13.18

By using the traditional method of calculation, the weekly levels of importance for General Electric Company (GE) are presented as follows:

Central Pivot Point – $12.96
R1 – $13.32
R2 – $13.58
R3 – $13.94
R4 – $14.29

S1 – $12.70
S2 – $12.34
S3 – $12.08
S4 – $11.81

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