Categories Industrials, Markets

GE shares spike on reports of healthcare unit spin-off

General Electric (GE) shares jumped 8% during intra-day trading on Wednesday after the company reportedly filed for the IPO of its healthcare unit. Citing people familiar with the matter, Bloomberg reported that the public listing of GE Healthcare may be expected in the spring of 2019.

A spin-off would make GE Healthcare a dominant player in the industry, with an estimated enterprise value of $65 billion to $70 billion. The company is primarily into the business of supplying medical equipment such as diagnostic machines and MRI scanners.

The healthcare unit is the beleaguered parent’s one of the most profitable segments, accounting for over 43% of its total operating profits last year. It also contributed almost 16% of General Electric’s total sales during this period.

In 2017, the segment reported sales of $19 billion and earnings of $3.5 billion.

The company had earlier this year announced plans to spin-off the healthcare unit, headed by CEO Kieran Murphy. JPMorgan, Bank of America, Goldman Sachs, Citigroup, and Morgan Stanley are reportedly working on the public listing.

What to expect from General Electric going into 2019

Investors believe the spin-off would help the company focus better on its core manufacturing operations.

General Electric shares have been battered by investors over the last two years. Since the beginning of this year alone, the stock has lost over 70% of its value. However, the stock has a 12-month price target of $11.64, suggesting a 70% upside from the current trading price, as some analysts expect the decluttering of the firm to bear results in the long term.

 

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