General Electric May be a Buy in the Right PortfolioWith General Electric soon to become three distinct business units, GE stock may be a buy, but only in the right portfolio.

Writing about a stock on the day it posts earnings can sometimes cause you to walk some statements back. But that's not the case as I look atGeneral Electric (NYSE:GE). If I had written about the company on October 25, the day it posted a solid, but not spectacular earnings report, my thought would have been the same. I think the stock may be a buy, but only in the right portfolio.

The difference is that investors appear to be viewing the stock much differently. On the day of the earnings report, GE stock didn't really do a whole lot. But the day after is a different story. GE stock is up nearly 5%. Some of that may be due to the overall bullish sentiment that seems to be gaining steam.

It also may be that investors are becoming more familiar with what the earnings report shows for the industrial conglomerate. Yesterday, the news was about the company's losses in its renewable energy business, specifically wind turbines.

Earnings Dropped Sharply

So what did theearnings reportreveal? The headline numbers showed top-line revenue of $19.08 billion. That was better than analysts' forecast. It was also better than the prior quarter and the same quarter in the prior year. Unfortunately, the same can't be said of earnings. The 35 cents per share was below the consensus estimate as well as the prior quarter and the prior year's quarter.

This may be a case, however, of a company preparing investors for the worst and then coming in better than expected. General Electric had warned that supply chain problems would influence earnings. However, the company announced a$1.3 billion restructuring planin its renewable segment. And chief executive officer, Larry Culp, told analysts he still expects the company's high-growth offshore wind business to be profitable by the middle of this decade.

Growth in Services

But the company did post growth in its Aerospace division. And a significant amount of this growth came form Services. Revenue in this area was up 33% from the prior quarter. Since this business tends to have higher margins and is more sticky, investors are rethinking their outlook for the stock.

Analysts seem to be as well. After sentiment on GE stocksoured over the summer, the initial response to the earnings report is favorable. Three analysts have increased their price target on the stock. And the one that lowered its target still forecasts an upside of over 15% from the stock's $76.25 price as of this writing.

A Split for the Better

One of Culp's missions since taking the helm of GE was to streamline the business. Initially, this meant shrinking the company's finance unit. And starting in 2023, the company will see its three current business units be separated intothree individual companies. GE Healthcare is on track to be the first of the spin-offs with the move expected to happen early next year.

The bullish narrative is a reverse "sum of its parts" argument. The thinking is that each individual company may receive a higher valuation from analysts. This will be because each company should be nimbler than they are as part of a conglomerate. This means that investors could exchange their GE shares for shares of the new companies and have the chance for better returns.

The Right Stock for the Right Portfolio

The idea is that you can buy GE stock today for a lower valuation than the three individual companies would have combined. But the larger question for me is where it would fit into a portfolio.

It hasn't been an income story for a long time. And it's unclear whether any of the new companies will be in a financial position to consider offering dividends. And as a growth story, it seems there may be other stocks that you can look at in the Industrials space that has a cleaner balance sheet.

And the spin-offs are taking place at a time when the economy is in a recession and investors are still avoiding risk-on assets. That's a lot of unknowns for me. But that's why I say, in the right portfolio, GE may be a good fit.