Market Overview

For General Electric, It's All About Short-Term Execution And Long-Term Transformation

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For General Electric, It's All About Short-Term Execution And Long-Term Transformation
  • General Electric Company (NYSE: GE) shares have risen 16.85 percent over the past month, reaching a high of $29.07 on October 16.
  • RBC Capital’s Deane Dray has maintained an Outperform rating on the company, while raising the price target from $30 to $32.
  • While the company’s transformation and value creation story is a long-term one, Dray believes that General Electric has been executing well, with robust earnings quality, despite the difficult operating environment.

According to the RBC Capital report, “Recent stock gains have the telltale signs of a “melt-up”… An array of catalysts on the horizon should drive further outperformance.”

Analyst Deane Dray mentioned that the company provided “positive updates on its portfolio transformation” during its Q3 earnings call. General Electric is on track to closing its GE Capital sale worth $100 billion in 2015, and the average deal multiple is ahead of expectations.

Management was able to boost GE Capital 2015 cash dividend to its parent by $2 billion. On the other hand, Alstam has obtained all the needed EU and U.S. approvals and expects to close the deal in Q4. Dray believes that the positive updates helped drive up the share price on October 16.

“We see GE as better positioned than many of its peers to weather a slow growth macro, with its $270 bil backlog representing +10 quarters of industrial revenues,” Dray stated.

The company has reiterated the full year guidance for its Industrial business, while modestly raising its Oil & Gas guidance for 2015.

“We had previously been using a placeholder of Jan 1, 2016 for the Synchrony swap, but in a positive development, GE now aims to complete the spin the week of Nov-16,” Dray added.

Latest Ratings for GE

DateFirmActionFromTo
Jul 2020Deutsche BankMaintainsHold
May 2020UBSMaintainsBuy
Apr 2020Credit SuisseMaintainsNeutral

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