Why did the S&P 500 add two new members this week?

Next Monday, the Standard & Poor's Index will add a new stock, Solventum, with the ticker symbol SOLV.

On Tuesday, it will add one more stock, this time GE Vernova GEV.

On Wednesday, two of the index's current members, V.F. Corp. (VFC) and Dentsply Sirona (XRAY) will be transferred to other S&P indices.

In the process, one of the legends of American business, General Electric (GE) will become smaller, and in 132 years, GE will no longer be just GE.

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These are not the only actions that will be taken by the S&P Dow Jones Index. They are happening because two very large companies - General Electric and 3M (the largest in the world) - are going to take a big step backward.MMMThe company has concluded that by spinning off some of its businesses, it can operate more efficiently and provide greater return potential for its shareholders.

The companies will also spin off three other companies, Fox Factory Holding FOXF, ModivCare MODV and E.W. Scripps SSP.

How the indices are shuffled

The sequence of events looks like this

MondaySolventum, the core of 3M's healthcare business, was spun off from 3M and added to the S&P 500. Solventum's 2023 sales of $8.2 billion represent about one-quarter of 3M's 2023 sales. 3M remains in the S&P 500 and S&P 100.

Tuesday: General Electric Vernova joins the index. It represents GE's group of energy companies - Renewable Energy, Power, and Digital. in november 2021, GE announced that it would split into three companies. one of them has already been spun off as GE healthcare company GEHC. the only company that will be left under GE Aviation is GE Healthcare. One of them has already been spun off as GE Healthcare, GEHC. GE will proceed with GE Aerospace only, but will keep the GE ticker symbol.

Wednesday Part 1: V.F. Corporation and Dentsply Sirona will be delisted from the S&P 500, and VF Corporation will become a constituent of the S&P SmallCap 600. VF operates in the outdoor and casual apparel sector, and its brands include The North Face, Timberline and Jansport. Its brands include The North Face, Timberline and Jansport. dentsply Sirona will be added to the S&P MidCap 400 Index. The company is a leading manufacturer of dental equipment and dental care products.

Wednesday Part II:Fox Factory Holding, a manufacturer of products for the automotive, off-road vehicle and motorcycle markets, will join V.F. Corp.Fox Factory is currently in the S&P 400 Index.

Wednesday Part Three:S&P 600 constituents ModivCare and EW Scripps will be removed from the index entirely.ModivCare was formerly known as Provident Services Corp.E.W. Scripps owns radio stations, programs and the National Spelling Bee. It was once one of the largest newspaper owners in the U.S. and a major radio station operator.

S&P Dow Jones, which manages the S&P and Dow Jones indices, is taking actions, all of which are related to the index modifications made in January.

The market capitalization of V.F. and Dentsply Sirona is no longer sufficient for inclusion in the S&P 500. The current minimum market capitalization is US$15.8 billion.

To enter the S&P 400, market capitalization must be between US$5.8 billion and US$15.8 billion. To enter the S&P 600, market capitalization ranges from $900 million to $5.8 billion.

Even before the spinoff was finalized, the two spinoffs that made it into the S&P 500 traded very differently

3M's large-scale healthcare business

3M spun off Solventum because the parent company was so large and it seemed like it would be in everyone's best interest to inject the healthcare business into a new venture. 3M has been struggling with growth issues and alarming environmental repair costs.

The Healthcare segment includes tapes and dressings, electronic monitoring equipment, orthopedic products and surgical supplies.

Solventum began trading at the issue price on March 26th, opening at $80 and closing at $91.05 USD. Friday's close was $69.55, down 13.1% from Wednesday's close.

Based on the company's expected earnings of $6.10 to $6.40, the forward P/E ratio is about 11.

3M will validate 19.9% of Solventum shares. The company is down 31 TP3T this year but surged 15.11 TP3T in March.

3M sells more than 60,000 products in a wide range of categories. From cellophane tape and sticky notes to Scotchgard, a waterproofing material for fabrics, 3M has it all.

GE Vernova Revitalizes Parent Company

GE Vernova also began trading at issue price on March 27, opening at $115 and jumping to $131.25. It closed at $136.75 on March 28, up 18.9%.

Based on projected earnings before interest, taxes and depreciation, this implies a forward P/E ratio of 12.

The company expects sales of $34 billion to $35 billion in 2024, with mid-single-digit revenue growth in 2025. Free cash flow is expected to be $700 million to $1.1 billion this year, increasing to $1.2 billion to $1.8 billion in 2025.

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Barrons noted that the Fed's performance in raising interest rates also affected GE. Wells Fargo analyst Matthew Akers raised his price target for GE Aerospace from $177 to $200.

Co-founded in 1892 by Thomas Edison, General Electric is an original member of the Dow Jones Industrial Average.20 In the 1980s and 1990s, under the leadership of the late Dr. Kurt Welch, General Electric evolved into a highly successful conglomerate.

After Welch retired in 2000, the company's stock price peaked, but after the 2008-09 financial crisis, the company was struggling and needed a bailout from Warren Buffett to survive. It wasn't until 2018, when Larry Culp, already a director, was asked to become chief executive officer, that GE began to struggle.

Karp cut expenses and General Electric paid off more than $100 billion in debt. The company sold off businesses that weren't working.

Karp then decided to split the company into smaller parts. These moves won him many Wall Street fans and probably made his personal stake in General Electric worth more than $1 billion.

General Electric stock has risen 37.5.5% this year. jumping 95.6% in 2023, outperforming Apple (AAPL), Alphabet (GOOG ) and Microsoft (MSFT).

Why other stocks aren't so strong.

In addition to the issues with furnishings and growth, stocks that have been pushed into less prestigious indices or out of indices altogether have recently encountered challenges due to the Covidien-19 pandemic and other reasons.

The prices of these stocks reflect these struggles.

• V.F. closed at $15.34 on March 28, up 1.71 TP3T, but down 18.41 TP3T year-to-date.
• Dentsply Sirona Inc. gained 0.41 TP3T to close at $33.19, but is down 6.71 TP3T so far this year.
• Fox Factory Holding was up 3.81 TP3T at $52.07, but is down 22.81 TP3T year to date.
• ModivCare fell 5.91 TP3T to $23.45, after accumulating 46.71 TP3T so far this year.
• EW Scripps rose 0.81 TP3T to $3.93, but has accumulated 50.81 TP3T of losses so far this year.

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