CNBC’s Jim Cramer on Tuesday hailed General Electric’s plan to split into three separate companies focused on energy, aviation and healthcare.
While the possible breakup of the American industrial conglomerate may seem symbolically bleak, the Mad Money host said it was the right and necessary financial move, and he trusts GE CEO Larry Culp to do it.
Culp, who took over GE in 2018, “saved the company, and while we may miss the GE name, the divisions themselves were a divided house that, of course, couldn’t hold out,” Cramer said.
Cramer said Culp did an excellent job streamlining GE’s business structure and cleaning up its balance sheet after it was impacted by the financial crisis. However, Cramer said it made no sense to hold the remaining units together at this point.
“Let me put it this way: if you started a business today, you’d never start one that’s part aerospace, part health care, and part energy, including renewable energy,” said Cramer.
GE plans to outsource its healthcare division by early 2023 and its energy division by early 2024, according to a press release from the company. The current GE will be the aerospace-focused company.
Once that happens, Cramer said the standalone companies will be easier to deceive for Wall Street analysts and investors alike.
“Even at its peak, that combination hasn’t wowed anyone in twenty years so you had to do it,” said the former hedge fund manager, but suggested that as separate entities it could be a different story.
“A healthcare company based on high-demand MRI machines that they can’t even get enough of? That’s good, ”said Cramer. “The power and renewable energy business could be very attractive to asset managers looking to go green – and there are plenty of them.”
GE shares rose 2.65% Tuesday to close at $ 111.29 apiece. The stock is up nearly 29% since the start of the year, outperforming the S&P 500’s earnings of around 25% over the same period.