On Wednesday, GE finalized deal with AerCap to sell its aircraft-leasing unit. Yahoo Finance’s Julie Hyman, Myles Udland, and Brian Sozzi discuss the details.
Video Transcript
JULIE HYMAN: I don't know what animal this next story resembles, if you look at the stock chart. I don't know if it's a dead one or a zombie.
BRIAN SOZZI: A dog.
JULIE HYMAN: I'm not sure. We're talking about General Electric. And we got to talk about this one this morning, this much-shrunken company, because it's going to sell its jet-leasing business to AerCap, which is an Irish company. The deal is valued at $30 billion, and a couple of significant things, here. First of all, it means the end of GE Capital, the sort of ashes of GE capital. The remains of that business is going to get sort of reintegrated into General Electric proper, which is interesting given the trajectory of that unit of the company, which had its role in the financial crisis and in the end was not a great idea for General Electric, I think we can say, writ large.
The other thing that we have to mention with General Electric is it's doing a reverse stock split, a 1-for-8 reverse stock split. So if you have eight shares of General Electric, that's going to get bound up to one share when the split is completed. And I believe that is going to be completed before May 4th, which is the next shareholder meeting. So Sozzi, you want to jump in here on these changes? And I know they're making some tweaks to their forecast as well.
BRIAN SOZZI: Yeah. Really, GE pulling out its full bag of tricks on its investor day that started this morning. Not surprised to see any of the stuff. This is what GE does. They have five trillion managers inside the company clicking through numbers and trying to come up with things like this. That's GE. That's what GE does.
Most important though, I think, for the markets more broadly here and other industrial mining companies-- GE out this morning reiterating their industrial sales guidance, also their free cash flow guidance of $2.5 billion to $4.5 billion for this year. Also, their full-year EPS guidance this year, reiterating that as well. $0.15 to $0.25 a share. So it would suggest that at least compared to GE a couple of weeks ago when they reported earnings, demand hasn't fallen off a cliff. And that might lend itself to just hope that the economy is starting to pick up steam to the extent, Myles, we've been hearing from a lot of economists that are on this network.
MYLES UDLAND: Yeah. I think certainly the industrial economy has done quite well. I just wanted to weigh in quickly on the stocks split, because for whatever reason, I find stock splits so interesting, whether they are traditional 4-for-1s, where it would be four shares for every one share, or the more rare reverse stock split, which, as Julie outlined, means you're going to get eight or you're going to get one share of GE for every eight that you already own.
I pulled some data here, because the company says in their release that they're doing this to bring the share count in line with its peers. And they have a good point. I mean, let's take UPS, for example. A company that has basically the same market cap as GE. They're within $15 billion of each other. UPS has 870 million shares outstanding. GE has 8.8 billion shares outstanding. Now, they'll have closer to 1 billion shares-- just over 1 billion shares-- outstanding after they affect the split.
But you know, we were chatting in our meeting this morning, guys. GE has always been a top-trending ticker on Yahoo Finance. Obviously, there's the GE pension plans that a lot of people were involved with through the years. There's a lot of shares out there in that. The lore of Jack Welch and kind of the way that he was the star of that '90s bull market expansion in many ways, I think, has a lot of business-focused, business-forward readers and viewers and so on interested in the stock and probably always will be interested in the stock. Many books written about it, so on and so forth.
But again, on a technical basis there, just on the number of shares outstanding, the volume that is done in the stock each day-- It is a massive outlier relative to its peer group. And so I just thought it was interesting to see a company, again, reverse stocks, but it's the kind of thing you do when your stock is trading at, let's say, $0.20 and you want to get back above $1 to meet minimum NASDAQ or NYSE requirements. GE obviously not in that position here. But it will be interesting to see GE trading back above $100 per share when the stock split goes into effect.
BRIAN SOZZI: Yeah. I got to get a screen grab of that one, Myles. That's great analysis. But I'll add on-- I'll just finish on this one. What is GE? Is it just a wind-down play? Is it an innovation play? Is it a recovery play? Despite them unwinding the business and continuing to unwind the business, this remains a very, very difficult company to understand and properly value.
JULIE HYMAN: All right. We'll leave it on that note, Brian Sozzi. To me, the trajectory of this business has just been incredible. I was just looking at the max-- the max out chart back to when it started trading, and it's just been a series of peaks and then very sharp cliffs downward.
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