William Blair and Canaccord analysts weighed in on industrial giants General Electric Company (NYSE:GE) and Boeing Co (NYSE:BA). While William Blair analyst remains bullish on GE following recent earnings announcement, Canaccord analyst lowers his Q4/15 and full year 2015 EPS estimates for Boeing ahead of the company’s upcoming earnings on Wednesday.
General Electric Company
Following GE’s Q4 earnings release, analyst Nicholas Heymann of William Blair weighed in on the stock. The analyst cited better than expected EPS, operating profitability, and cash flow from operations, as well as a lower tax rate. However, the company posted lower than expected sales resulting from a $1 billion allocation to planned sales, “for which project financing was unable to be finalized.” The analyst states that had it not been for this delay, sales would have increased by 2%. Another reason for the “perceived shortfall” was the unclear inclusion of Alstom Energy’s sales.
Haymann also comments on the planned $3.4 billion 2016 restructuring, explaining that the” remaining $2.7 billion in restructuring (and their potential incremental benefit) should offer earnings upside once they are finalized.” While guidance for power sales undermined expectations, the analyst states that GE’s H-class turbines, which will be introduced in the second half of 2016, will account for 60-65% of the year’s power sales in the last 2 quarters. The analyst expresses bullishness regarding GE’s backlog growth, explaining that “Because of their long-cycle and contractual nature, the vast majority of GE’s 2016 industrial sales are currently in GE’s firm backlog.”
On January 25, 2016, the analyst reaffirmed his Outperform rating on the company with a $38 price target. He states, “GE is the only large-cap diversified industrial with a high potential to double its share price…”
According to TipRanks’ statistics, Nicholas Heymann has a 47% success rate recommending stocks with an average return of -0.1% per recommendation.
Out of the 11 analysts who have rated the company in the past 3 months, 8 gave a Buy rating while 3 remain on the sidelines. The average 12-month price target for the stock is $33.40, marking a 17% upside from where shares last closed.
Analyst Kenneth Herbert of Canaccord weighed in on shares of Boeing, after the company announced that it will take a $569 million after-tax charge in its fourth-quarter results as it scales back production of its 747-8. As a result of the charge, the analyst is decreasing both his Q4 and full year EPS estimates, which account for the $0.84 earnings per share impact.
For earnings, the analyst will focus on guidance, hoping the company will reiterate break-even plan for the second half of 2016. Related, the analyst believes the 787 will be profitable starting in 2017. According to the analyst, “sentiment on the 787 will be a key driver for BA stock, even with the cycle concerns, considering the importance of the 787 to the FCF outlook and upside.” As a result of the 747-8 rate cut, the analyst expects a rate cut for the 777 model starting in 2018, although believing “the chances for an announcement… are now lower.” He’s also “bullish on the commercial OE cycle,” though believes the “risk off” trade benefits defense and commercial AM stocks.
On January 25, 2016, the analyst maintained his Buy rating with a $165 price target. Herbert states a compelling entry point for investors due to the “recent weakness,” citing a “continued upside” in FCF.
According to TipRanks’ statistics, Kenneth Herbert has a 32% success rate recommending stocks with an average return of -1.1% per recommendation.
Out of the 7 analysts who have rated the company in the past 3 months, 6 gave a Buy rating while 1 remains on the sidelines. The average 12-month price target for the stock is $171.20, marking a 35% upside from where shares last closed.