GE Fights Mediocrity

GE must be getting sick of a stock price which still sits below where it was five years ago.

The company is talking about selling its underperforming plastics unit.

And, now it is buying the aerospace unit of Smiths Group in the UK. GE (GE) will pay $4.8 billion.

And, why not? The operation sells aircraft components. GE is already in the aircraft engine business, and its financial services business handles aircraft leasing. According to GE, the deal would have been accretive if done in 2006.

The Smith Groups aerospace unit currently supplies big aircraft builders lik Boeing (BA) and Airbus. GE is betting the the increase in orders at these companies will continue as the introduce new models like the A380, 777, and 747-8.

Since Jack Welch left, GE is like the best team in football never to win the SuperBowl. The management is obviously trying to retool the company after saying 2007 would show an EPS growth rate lower than 2006.

If management can reshape the company, the stock might get above $40. And, banish Jack Welch’s ghost.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.