The Early Returns From GEA Group's Turnaround Have Been Very Encouraging

I know it's a corporate-speak cliché, but there really is something to notions like "under-promise and over-deliver" and "plan the work, work the plan", and I think you see some of the benefits already at GEA Group (OTCPK:GEAGY) (G1AG.XE). Although I saw relatively modest near-term upside before if management "only" hit the initial targets, execution on the turnaround plan has been better than expected, and the more ambitious targets that I mentioned in that piece are now relevant to the conversation.

There's still a lot of work to be done. While management has already largely decentralized the operations, the divestitures haven't really even started, and certain projects, like the turnaround of the Liquid & Powder Technology segment, are going to take years as new management works through bad projects on the books. Still, there is a credible plan here, and I like management's decision to focus on food, beverages, and pharmaceuticals as future growth drivers (not unlike SPX FLOW (FLOW)). With low single-digit revenue growth, mid-single-digit FCF growth, and high single-digit adjusted operating margins supporting a fair value more than 20% above today's price, I still think this is a name worth considering.

 

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The Early Returns From GEA Group's Turnaround Have Been Very Encouraging