General Electric: How To View The GECAS News

Jan. 07, 2019 3:37 AM ETGeneral Electric Company (GE)46 Comments
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  • It is being reported that Apollo is working on a deal to buy GE's jet leasing business (GECAS) for $40 billion.
  • I will dig into the numbers and provide my thoughts on the proposed "deal".
  • I am long General Electric and I plan to stay long the stock.
  • This idea was discussed in more depth with members of my private investing community, Going Long With W.G.. Start your free trial today »

General Electric's (NYSE:GE) stock has been a major disappointment over the last two years, as GE shares are down by approximately 73% over the same period of time when the S&P 500 (SPY) is up 24% (yes, that is 97 percentage points).

ChartGE data by YCharts

I recently described why I thought that the GE Healthcare IPO was meaningful news but, in my opinion, investors should be really excited about the fact that GE will be able to dispose of its jet leasing business, GE Capital Aviation Services (or GECAS), for billions of dollars. To this point, I will explain why the recent news should be viewed in a positive light.

A Potential GECAS Deal

It was reported that Apollo Global Management (APO) was considering bidding for GECAS, which is rumored to fetch a bid around $40B (I will get back to this number later). There have been rumblings about GE selling this promising business dating back to 2016 so I am not the least bit surprised about the potential Apollo deal. However, I was surprised about the $40B that is being reported.

About The Business

GECAS offers aircraft leasing, financing, services, consulting, and, according to the company, this business unit is the world's leading commercial aircraft and engine lessor & lender. And make no mistake about it, GECAS' numbers are impressive.

Source: GE Capital

It's no wonder that GECAS has been considered the crown jewel of GE Capital. Plus, GECAS does not just sound like a good business, this unit has reported strong operating results for years. For example, the unit has consistently reported annual profit of $1B over the last few years.

Source: Bloomberg

Additionally, the unit recently brought in approximately $5B in revenue and only accounted for 26% of total assets (i.e., it's a high margin business).

This article was written by

WG Investment Research profile picture
Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long GE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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