General Electric’s (GE) restructuring game continues.
Last month, the company announced it would sell 166 million shares of oilfield service company Baker Hughes (BHGE), which should raise about $4 billion. Just last week, GE confidentially filed paperwork for an IPO of its healthcare segment next year.
The industrial giant is a shell of what it used to be; while it still generates substantial revenue, investors have run away from the stock over GE’s enormous debt over stemming from its GE Capital unit. The company continues to restructure in order to get a better grip on its finances and return to glory. With that in mind, Gabelli analyst Justin Bergner remains bullish on GE stock with a Buy rating and price target of $15. (To see Bergner’s track record, click here)
Bergner believes “GE has additional liquidity options that are overlooked and has also had some positive read-throughs in the last month.” On GE’s rumored healthcare IPO, he says, “an IPO of 19.9% would likely bring in north of $10B but give up access to what we estimate as $3B of free cash flow,” but warns that “power cash outflows being brought back close to breakeven vs the $2B+ 2018E outflow may be a prerequisite for this IPO to go forward.”
The analyst says GE also has other liquidity options. He highlights the sale of BHGE shares as a positive step in bringing more cash to the company. Bergner says, “adding in our estimated $700mm for 90% of ServiceMax (sold to Silver Lake) and $130mm for Neogenomics shares, plus future Current proceeds, we see $5B+ in proceeds in lieu of the $5B we thought we thought might be raised by a sale of core digital and power conversion.”
The analyst community is cautiously optimistic over the next 12 months, even as GE has plummeted this year. TipRanks analysis of 18 analyst ratings on the stock shows a Moderate Buy consensus, breaking down into 7 Buy, 10 Hold and 1 Sell ratings in the last three months. TipRanks shows that the average analyst price target is $10.79, which represents about 48% upside from current levels. (See GE’s price targets and analyst ratings on TipRanks)