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General Electric to Divest Lighting Business, Shares Rise

Zacks Equity Research

General Electric Company GE yesterday announced its plan to divest the Lighting business to Massachusetts-based Savant Systems, Inc. Financial terms of the transaction have been kept under wraps.

The divestment is in sync with the company’s efforts to transform into an industrial company. Market sentiments were positive, with shares gaining 7.2% yesterday. The closing share price was $7.29.

Savant Systems engages in providing home control and automation services, especially in the mid-and luxury markets. The company’s home control system gives homeowners control over energy, lighting, security, entertainment and climate.

Divestment Details

The GE Lighting business comprises of innovation smart home and home lighting solutions. Subject to the fulfillment of customary closing conditions, the divestment is anticipated to be completed in mid-2020.

Per the definite agreement signed between the parties, GE Lighting will continue to operate through its headquarters located in Cleveland, OH. Its workforce of more than 700 people will be transferred to Savant Systems.

The transaction is believed to be a win-win situation for General Electric and Savant Systems. While General Electric will be able to concentrate more on its core businesses, Savant Systems will enjoy enhanced market reach, driven by the popularity of the GE brand.

It is worth noting here that a licensing agreement (long-term) for the use of GE brand post the completion of the divestment has been signed between the parties.

General Electric’s Restructuring Plans

In June 2018, General Electric communicated plans to transform itself into a high-tech industrial company, focused on Aviation, Power and Renewable Energy.

It then decided to separate GE Healthcare and turn it to a stand-alone company. Also, General Electric lost its controlling shareholding in Baker Hughes Company BKR and divested GE Transportation to Wabtec Corporation WAB in 2019. General Electric also completed the divestment of the BioPharma business to Danaher Corporation DHR in March 2020.

Further, the company is on track to reduce exposure to the GE Capital business as well as lessen its debt burden.

Zacks Rank, Share Price Performance and Earnings Estimates

General Electric currently has a market capitalization of $59.5 billion and a Zacks Rank #3 (Hold). The company will likely gain from its portfolio-restructuring program, the digital business, solid liquidity and efforts to reduce leverage in the years ahead. However, the coronavirus outbreak has marred its near-term prospects.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past three months, the company’s share price has decreased 34.9% compared with a 10.2% decline recorded by the industry.




Currently, the Zacks Consensus Estimate for General Electric’s earnings is pegged at 4 cents per share for 2020 and 36 cents for 2021, suggesting declines of 90.9% and 45.5% from the respective 60-day-ago figures.

General Electric Company Price and Consensus

 

General Electric Company Price and Consensus

General Electric Company price-consensus-chart | General Electric Company Quote

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