Not Out of Woods Yet, But Is General Electric (GE) Stock a Buy?


As General Electric (GE) continues its restructuring efforts, investors continue to ponder how to value the stock. While some believe the tide has turned and the stock is a stable buy, others are not quite ready to make the jump. Share prices have risen by about 30% since the beginning of the year, but have exhibited considerable volatility, rising and falling 10% twice already. But many on Wall Street believe the company has proven itself as a worthy investment for the long-term, as it continues to trim its fat.

William Blair analyst Nicholas Heymann is clearly one of them, as he maintains his  Outperform rating on GE stock (To watch Heymann’s track record, click here)

For many, CEO Larry Culp has been the primary reason for optimism. Heymann says Culp had “initially materially [enhanced] GE’s financial flexibility with the sale of the biopharma portion of GE Healthcare,” and recently “spent a disproportionate amount of his time transforming how GE Power is fundamentally managed, not just operationally right-sized and restructured.” As Culp continues to retool other parts of the business, many investors are increasingly optimistic that the company will continue to show strong results.

Heymann says “continuing to enhance GE’s financial flexibility remains a top priority and most likely could be further materially improved with the sale of the remaining GE Healthcare operations.” The analyst estimated that could generate more than $40 million after tax. GE has had success over the past year with spinning-off non-critical assets, as a way to balance its finances and focus on its core products.

Though it appears that GE is turning itself around, one short-term hurdle could be connected to the grounding of the Boeing 737 Max. While it is expected that the airplane will once again be allowed to fly soon, there is still no exact word on when it will take flight, and when carriers around the world will bring it back into service. GE is in a joint partnership that manufactures the LEAP engines used in the 737 Max, and with production cut significantly, this could impact GE’s revenue in the short-term.

All in all, it is not a certainty that GE is out of the clear just yet, but many are investing as if clear skies are ahead. CEO Culp has been credited for his recent successes, and many trust that this will continue. TipRanks analysis of 15 analyst ratings shows the confidence with a consensus Moderate Buy rating. This breaks down into six Buy, seven Hold and two Sell ratings. The average price target of $11.18 is about 9% higher than its current value. (Click here to see GE’s ratings price targets on TipRanks)

 

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