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General Electric Healthcare Spin-Off a Positive Catalyst for GE Shares - BofA

Stock Markets Oct 13, 2022 13:52
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By Sam Boughedda

General Electric Healthcare (NYSE:GE) filed its Form 10 after market close on October 11, with the planned spin-off expected in the first week of January 2023.

Following the news, BofA analysts said the firm believes there are positives from the healthcare spin-off.

"We view the Healthcare and Vernova (Power & Renewable; planned for early 2024) spins as positive catalysts for GE shares. However, in the near term, we expect earnings to be challenging," wrote the analysts, adding that BofA maintains its Buy rating and $105 price target on the stock.

They added that they believe the filing counters investor concerns that Healthcare has underinvested in R&D.

"R&D spending has been steady at $0.8bn/year (7-8% of revenue). In fact, 21% of 2021 orders were for products introduced in last year. Software platforms have scale, generating $1.2bn of revenue (7% of total) in 2021. The Ultrasound and Pharmaceutical Diagnostics (PDx) segments are highly profitable franchises, while Imaging faces a tougher set of competitors, in our view," they added.

The analysts also went on to state that margin recovery seems probable in 2023.

"To be clear, we expect continued supply-chain pressures in 3Q22. With price/cost turning positive in 2Q and the PDx plant in Shanghai back at full capacity, we are optimistic about the margin recovery over time."

General Electric Healthcare Spin-Off a Positive Catalyst for GE Shares - BofA
 

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