Morgan Stanley Remains Steady On GE After Earnings Call

General Electric Company’s GE shares surged after the announcement of third-quarter results.

The investor response was driven by the company’s improved cash performance, while little attention was paid to Long Term Care (LTC) and pension updates, according to Morgan Stanley.

The Analyst

Morgan Stanley’s Joshua C Pokrzywinsk maintained an Equal-Weight rating on General Electric, keeping the price target at $10.

The Thesis

“As much as we believe investors gained clarity from the Long Term Care (LTC) loss recognition testing and believe the $1B charge was better than feared, it appears to be a secondary driver of share performance,” Pokrzywinsk wrote in the note.

General Electric reported its adjusted earning at 15 cents per share, higher than the consensus estimate of 11 cents per share.

Segment income came below expectations, largely on Power, while Industrial generated strong free cash flows, meaningfully ahead of consensus, Pokrzywinsk said.

Peers have cited weaker trends through the third quarter and issued more cautious projections, the analyst noted. He added that General Electric had “long cycle businesses,” which seem to be “fairly insulated” from the macro deterioration, at least for now.

Pokrzywinsk expects Aviation services to remain strong in the fourth quarter and Power services to recover.

Price Action

Shares of General Electric were down 0.84% to $10.02 at the time of publishing on Thursday.