Market Overview

JPMorgan Lowers General Electric Price Target, Says EPS Guidance Is 'Not A Credible Number'

Share:
JPMorgan Lowers General Electric Price Target, Says EPS Guidance Is 'Not A Credible Number'
Related GE
Taking A Trade Break: Weak Overseas Data Center Stage Despite Solid Retail Sales
51 Biggest Movers From Yesterday
Levin Capital Strategies, L.p. Buys The Kraft Heinz Co, Intel Corp, Lincoln National Corp, ... (GuruFocus)

Not even one year ago, the Street was working under the assumption that General Electric Company (NYSE: GE)'s $2 EPS target was "not achievable," so estimates moved lower to $1 per share. But the "great reset is not quite reset," according to JPMorgan.

The Analyst

JPMorgan's C. Stephen Tusa Jr. maintains an Underweight rating on General Electric's stock with a price target lowered from $14 to $11.

The Thesis

The sell-side bulls "stuck" with a $2 EPS estimate until very recetly and are now standing by a $1 EPS estimate, within management's guidance of $1 to $1.07, Tusa said in a Tuesday note.

The problem is that the $1 EPS estimate is "still disconnected" from reality for four primary reasons, the analyst said: 

  • A $1 EPS estimate "is not a credible number," since it does not include necessary restructuring initiatives in power and renewables, which creates downside to EBIT — and any proceeds from potential asset sales will flow to the balance sheet as opposed to shareholders, the analyst said. 
  • A $1 EPS estimate is not a trough number for multiple reasons, as the aviation segment is "well off" its trough; health care isn't very cyclical; and Baker Hughes, a GE company Class A (NYSE: BHGE) could be close to its trough, but visibility is "challenged," Tusa said. 
  • Any upcoming guidance for profit upside in the power segment "should not be banked," as there is "no tangible support for a sector-type margin entitlement in its current form."
  • GE has high leverage, relies on asset sales and has "no room for breakage" on fundamental guidance that's already "aggressive," the analyst said. 

Price Action

General Electric shares were down 3.41 percent at $14.58 at the time of publication Tuesday morning. 

Related Links:

Ken Langone's Inside Account Of General Electric's Blunders

Warren Buffett Says He Could Write A Check To Buy General Electric If He Wanted To

A rendering of the GE Haliade-X offshore wind turbine. Courtesy photo.

Latest Ratings for GE

DateFirmActionFromTo
Dec 2018JP MorganUpgradesUnderweightNeutral
Nov 2018CitigroupMaintainsBuyBuy
Oct 2018BarclaysMaintainsOverweightOverweight

View More Analyst Ratings for GE
View the Latest Analyst Ratings

Posted-In: C Stephen Tusa GE Power GE Renewables JPMorganAnalyst Color Price Target Top Stories Analyst Ratings Best of Benzinga

 

Related Articles (GE + BHGE)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
DLTRBernsteinUpgrades0.0
CNPUBSUpgrades34.0
UGIUBSDowngrades63.0
ATOUBSDowngrades106.0
CSCONomuraDowngrades50.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Analyst: For US Steel, Tariffs Are A Sell-The-News Event

Adding Intrigue To Europe ETF Trade