GE Is Starting to Play Offense, With a $1.45B Healthcare Deal, and the Stock Is Jumping -- Barrons.c | GE Message Board Posts


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Msg  7050 of 7077  at  9/23/2021 1:19:32 PM  by

jerrykrause


GE Is Starting to Play Offense, With a $1.45B Healthcare Deal, and the Stock Is Jumping -- Barrons.com

 GE Is Starting to Play Offense, With a $1.45B Healthcare Deal, and the Stock Is Jumping -- Barrons.com
 
 
Dow Jones
 
 
Al Root 

General Electric's turnaround is entering a new phase. The company is moving from playing defense -- selling divisions and paying down debt -- to playing offense by investing more aggressively for the future.

On Thursday, General Electric (ticker: GE) announced a $1.45 billion acquisition of an ultrasound business, BK Medical.

Investors approve: GE stock rose 4.5% to about $103 in recent trading, outpacing the S&P 500 and Dow Jones Industrial Average's respective gains of 1.3% and 1.4%.

The move seems sensible, and it's just the second large acquisition done since CEO Larry Culp took over in late 2018. (And compared with GE's $108 billion market capitalization, the purchase is actually relatively small.)

Initially, Culp was focused on cutting debt, selling assets, and making operations more efficient. GE is still reducing its debt load and working to improve profit margins in all of its divisions. But another acquisition is a signal that, slowly, growth is becoming more of a focus for management.

"This is a beautiful fit for us," says GE Healthcare CEO Kieran Murphy tells Barron's. GE's healthcare franchise generates roughly $17 billion in sales each year -- excluding recent asset sales. Ultrasound is a $3 billion part of that franchise. Importantly, for investors, the acquisition is relatively small and fits neatly into the segment's operations. "This is a fast-growing business with good margins," adds Murphy.

Ultrasound is an imaging technology most often used to diagnose health problems. This deal moves GE's ultrasound business, however, beyond diagnostics and into therapeutic applications -- like providing imaging guidance during an operation. "Think about a brain surgery," explains GE's Ultrasound Head Roland Rott. There is an MRI taken before surgery, but that's before a procedure would begin. "This is a real-time guidance and navigation opportunity for surgeons."

GE has actually done a lot of deals recently, but mostly to sell things. Healthcare, however, was never really part of GE's problems. GE Healthcare's growth -- excluding asset sales such as that of the biopharma division -- has been solid, and profit margins have improved since 2018.

Murphy says his division, under Culp, has been focused on doing things better. He is optimistic about the outlook for his division: "The key point here is growth." GE Healthcare has even made a couple of smaller acquisitions in recent months, and Healthcare R&D has grown each year since 2018.

Covid-19, of course, looms over all healthcare businesses, including GE's. But for the bottom line, the pandemic tends to be positive for the sector. Governments around the world are focused on building more resilience in their healthcare systems. That means, in part, building more capacity, including in imaging operations.

There is also pent-up demand in the healthcare system, as many procedures have been delayed by the continued pandemic. So "being more efficient is key," adds Rott. That's ultimately what BK's technology enables, and why GE likes it.

Year to date, GE stock has gained about 14%, similar to comparable gains of the S&P and Dow. 


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