General Electric Company (GE) Has a Bear Tempted to Upgrade, But Not Quite Yet

Oppenheimer's Christopher Glynn says it is premature to make the "pivot" from bearish to the sidelines on GE stock.

Oil and gas (O&G) opportunities are getting better for General Electric Company (NYSE:GE), but though one bear is intrigued by the industrial giant, for now, what seems “interesting” is not enough to earn an upgrade to the sidelines.

Oppenheimer analyst Christopher Glynn says now stands as “early to pivot to neutral rating,” believing that “hitting ’18E FCF guidance is a more relevance benchmark in our view (at levels where valuation case is premature).”

As such, though liquidity concerns seem to be “answered,” the analyst reiterates an Underperform rating on GE stock without suggesting a price target. (To watch Glynn’s track record, click here)

“We are deferring upgrading shares to Perform, even as O&G prospects improve (along with macro levered GE parts), and with view that divestiture proceeds/BHGE repurchase outweigh pending insurance reserves overhang, as near-term headlines could include (we speculate) a higher tax rate from reform, and potential for further upsizing of pending legacy insurance reserve funding requirement (given lack of December update; divestiture proceeds should more than answer any call on parent if it comes to that, though on a lag basis). We are trimming ’19E EPS by $0.15 to $1.05, including ~$0.05 each from slower contract asset growth, GEC run rate adjustment, and eliminating Transportation/Lighting (estimate <half targeted $20B EV value of divestitures over next 1-2 years; assume balance offset by proceeds re-allocation),” asserts Glynn.

TipRanks shows a more cautiously optimistic Wall Street majority circling this industrial giant, with Wall Street torn between the bulls and the bears. Based on 15 analysts polled by TipRanks in the last 3 months, 3 are bullish on General Electric stock, 8 remain sidelined, while 4 are bearish on the stock. With a return potential of 13%, the stock’s consensus target price stands at $21.42.

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