CNBC’s Jim Cramer on Tuesday cheered General Electric’s plan to break itself up into three standalone companies focused on energy, aviation and health care.
While the eventual separation of the American industrial conglomerate may be symbolically somber, the “Mad Money” host said it’s the correct and necessary financial move, and he trusts GE’s chief executive, Larry Culp, to steer it through.
Culp, who took over GE in 2018, “saved the company and, while we might miss the GE name, the divisions themselves were a house divided which, of course, could not stand,” Cramer said.
Cramer said Culp has done an excellent job streamlining GE’s business structure and cleaning up its balance sheet after it was impaired by the financial crisis. However, at this point, Cramer said it no longer made sense to keep the remaining units together.
“Let me put it like this: if you were starting a company today, you’d never create one that’s part aerospace, part health care, and part power, including renewables,” Cramer said.
GE aims to spin off its health-care arm by early 2023 and its energy unit by early 2024, according to a company press release. The current GE will be the company focused on aviation.
Once this happens, Cramer said the standalone companies will be easier for Wall Street analysts and investors alike to get behind.
“Even at their peak, this combination hasn’t been able to excite anyone for twenty years, hence why you had to do this,” the former hedge fund manager said, but he suggested it may be a different story as separate entities.
“A health-care company based on high-demand MRI machines that they can’t even get enough of? That’s a good one,” Cramer said. “The power and renewables business could be very enticing for money managers who want to go green — and there’s a lot of them out there.”
Shares of GE rose 2.65% Tuesday to close at $111.29 apiece. The stock is up nearly 29% year to date, outpacing the S&P 500’s roughly 25% gain over the same span.