Sterne Agee Lowers Price Target on GE Following Meeting

Sterne Agee published a report where they said they had lowered the estimates and price target on General Electric (NYSE: GE) on Wednesday.

In the report, Sterne Agee said that it had come away from GE Cap's outlook meeting “satisfied that the business model is sound, the segment is not a liability, even with uncertainty in Europe, and that ongoing strategic actions such as efforts to shore up the funding mix, lower origination costs (down $4 billion in 36 months) and strengthening capital reserves will enable GE Cap to begin to repay its historical dividend to the parent.”

Sterne Agee lowered the price target to $22.75. Sterne Agee analyst Ben Elias said that the GE cap meeting surpassed expectations. “We are seeing evidence of improving credit quality, and better provisioning for losses, especially vs. peers,” he said.

“Also, delinquencies are declining, albeit not as quickly as one would want in light of the rapid shrinkage in ENI, the $80B in 2012 maturities are well planned for and so is on-going funding, origination volume is steady with better ROI than legacy assets and management is guiding to double digit earnings growth for 2012. GE Cap is highly committed to resuming the dividend to the parent in 2012, and mentioned that even though they may make only one payment, it will be a catch-up or catch all and represent 45% of net income for the full year if and when it gets paid.”

“The $2.7B question is not ‘Can GE Cap pay the dividend?' But rather ‘Will the Fed have enough time and resources to finish their review and stress test of GE Cap's portfolio and capital structure before year end?'”.