GE's Q2 Results Keep It On Track With Overall Plan

"Lingering skepticism with respect to the significant turn in organic growth in 2H16 that GE anticipate sis likely, but we think easing year ago comparisons and relatively good visibility to Power deliveries should support a turn from negative organic growth in 1H16 to positive in 2H," analyst Andrew Kaplowitz wrote in a note.

Quarterly Rundown

GE's Industrial segment margin of 14.4 percent in the second quarter (including Alstom) beat Citi's 13.7 percent estimate, while the analyst expects an uptick in services orders.

"Given the high margin nature of GE's service businesses, we think a turn in service orders (from -1 percent organic in 2Q) to +mid-single digits growth in 2H16 (as the company expects) could bolster confidence in GE's ability to sustain ongoing EPS growth," Kaplowitz noted.

Related Link: Goldman Sachs Remains Neutral On General Electric Following Earnings

That said, the analyst highlighted that the company's weak cash generation through the first half of 2016 remains an overhang.

Guidance

However, the analyst noted that GE's unchanged guidance for $12 billion–$14 billion of Industrial CFOA implies that the company has plans to overcome weak first-quarter cash generation as deliveries ramp and as it focuses on improving receivables collections.

"Management again noted that cash generation is a key metric with respect to variable compensation, so we sense a high level of urgency within the company with respect to achieving cash generation targets for the year," Kaplowitz added.

Estimates And Expectations

Kaplowitz kept his 2016 and 2017 EPS targets unchanged at $1.50 and $1.80, respectively. The analyst also maintained a price target of $36 on the stock, implying a potential upside of 12.3 percent.

Shares of GE closed Friday's regular trading session at $32.06 and were seen down 0.53 percent in Monday's early trading at $31.87.

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