GENERAL ELECTRIC CO. $28 (New York symbol GE; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 10.1 billion; Market cap: $282.8 billion; Price-to-sales ratio: 2.4; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.ge.com) has agreed to sell $157 billion in assets of its GE Capital financing division. So far, it has completed transactions equalling $104 billion.

These sales are part of GE’s plan to focus on its industrial businesses, including jet engines, power plant equipment, medical gear and locomotives.

Shrinking GE Capital cuts risk

After the sales, the financing business will supply less than 10% of GE’s earnings, down from 42% in 2014. The U.S. Federal Reserve considers GE Capital a “systemically important financial institution”; reducing it should let GE avoid the tougher capitalization requirements the Fed imposes on big lenders.

GE’s revenue rose from $147.3 billion in 2011 to $147.4 billion in 2012, but it fell to $146.0 billion in 2013. Revenue then rebounded to $148.6 billion in 2014 before declining to $117.4 billion in 2015 as the company sold more of GE Capital. As well, revenue from its oil and gas operations (14% of the total) fell 13.8% in 2015 as producers delayed projects because of low crude prices.

Overall earnings rose 13.5%, from $14.9 billion in 2011 to $16.9 billion in 2013. Earnings per share gained 25.2%, from $1.31 to $1.64, on fewer shares outstanding. Earnings slipped to $16.7 billion in 2014, but per-share profits rose to $1.65. In 2015, earnings declined to $1.31 a share (or $13.1 billion).

In 2016, GE will see more benefits from its recent alliance with France’s Alstom SA, a leading maker of transmission gear and parts for power plants.

Alstom’s expertise is a big plus

Under the deal, GE has formed three 50/50 joint ventures with Alstom: one combined their electrical grid operations, while a second focuses on products for renewable energy projects. The third controls Alstom’s nuclear power equipment division. In all, GE contributed $10.3 billion to the partnerships.

By 2020, GE expects the elimination of overlapping operations and other efficiencies will cut $3 billion from its annual expenses.

The company is also selling its appliance division, which makes refrigerators, ovens and washing machines, to China’s Haier Co. for $5.4 billion. In addition, GE is moving its headquarters from Connecticut to Boston in 2018, which should cut its corporate tax bill. The move could also create property tax breaks and other incentives worth $145 million.

The cash from GE’s asset sales, as well as savings from the Alstom deal, will help the company fund its plan to buy back $50 billion in shares, including $18 billion worth in 2016.

Rising earnings justify p/e

The company will probably earn $1.45 to $1.55 a share in 2016, and the stock trades at 18.7 times the midpoint of that range. That’s reasonable considering GE’s improving long-term earnings. The $0.92 dividend yields 3.3%.

GE is a buy.