Should You Pull the Trigger on General Electric (GE) Stock on Back of New Leadership?


General Electric (GE) is a mover and shaker out on the Street today, with investors sparking the stock on an almost 10% upturn. Why the excitement? The industrial giant has ousted its CEO, installing new leadership for the second time in two years as it struggles to return to growth. Former Danaher CEO Larry Culp was named Chairman and CEO of GE effective immediately, replacing former CEO John Flannery. GE shares tumbled nearly 60% since Flannery was named CEO of GE last June. Is there a light at the end of the tunnel?

Cowen analyst Gautam Khanna commented, “Investors will view the change favorably given Culp’s successful CEO tenure at Danaher, his GE “outsider” status, and the fact that Culp doesn’t “need” the position, having already completed a lucrative & reputable career […] At DHR, Culp was known for prudent capital allocation ($25B deployed for M&A during his tenure), a sharp contrast to GE’s track record, & his DHR tenure coincided with a dramatic increase in DHR’s market cap and revenues (nearly 5x) as DHR shifted into fast growth markets.”

“The challenges that GE faces (high leverage; Power’s cyclical, structural and operational challenges; etc) are not easily or quickly fixable. GE should be commended for selecting a credible, seasoned GE outsider as Chairman/CEO who is likely to more candidly and quickly identify how bad things may be and what needs to be done about it. This may limit the seemingly perpetual investor fear of “what shoe will drop next” at GE, as negative estimate revisions have been a constant feature of GE for years irrespective of the firm’s leadership (Immelt, Flannery). Thus, under Culp, investors may be willing to look further out to assess what GE may be worth post the planned portfolio moves, which may sustain the bounce in the stock that we expect today,” the analyst continued.

Net net, Khanna reiterates a Market Perform rating on General Electric shares, with a price target of $14.50, which represents a potential upside of 17% from where the stock is currently trading. (To watch Khanna’s track record, click here)

Wall Street believes Khanna is smart to play it safe when it comes to the struggling industrial conglomerate’s prospects ahead, as TipRanks analytics reveal GE as a Hold. Out of 12 analysts polled in the last 3 months, 1 is bullish on General Electric stock, 10 remain sidelined, and 1 is bearish. With a potential upside of nearly 18%, the stock’s consensus target price stands at $14.55. (See GE’s price targets and analyst ratings on TipRanks)

 

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