Shares of General Electric rose 6.24% on Friday after Bernstein Research raised its rating on the largest U.S. conglomerate to "outperform," saying it saw major divestitures coming.
The world's largest maker of jet engines and electricity-producing turbines is likely to sell off businesses generating $25 billion to $30 billion of revenue — almost one-fifth of the company — over the next two to three years as it focuses on its core infrastructure operations, according to analyst Steven Winoker.
"Much of the bet on GE is a bet on the company's ability to reinvest proceeds in enterprises that add value for shareholders," Winoker wrote in a note to clients.
The sprawling Fairfield, Connecticut-based company — with operations from investing in commercial real estate to making light bulbs — for years faced investor calls to divest incongruous parts of its portfolio, including NBC and its GE Capital finance unit.
Chief Executive Jeff Immelt largely resisted those calls until last year, when the severe economic downturn began to pound GE's financial results, setting the stage for a sharp sell-off in its shares.
The company has since begun streamlining GE Capital — its Achilles heel through the current downturn — and according to sources is in talks about selling a 51 percent stake in NBC Universal to No. 1 U.S. cable company Comcast [CMCSA 14.6905 0.4905 (+3.45%) ].
CNBC is a unit of NBC Universal.
That deal would also require an accord with French media company Vivendi, which holds 20 percent of NBC Universal.
GE could sell NBC Universal, its appliance arm and parts of GE Capital, Winoker wrote.
"Going forward, we have more confidence in GE picking the right core/adjacent strategic properties and integrating them successfully," he wrote.
Still, selling off such large pieces of the company may not be easy. GE last year put its appliance arm and its U.S. private label credit card business on the block, but found no buyers.
Winoker hiked his price target on GE shares to $19 from $18. He had previously rated GE "market perform."
Over the past year they have been as high as $20.98 — a point reached on Nov. 5, 2008 — and as low as $5.87 on March 4.
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