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GE

General Electric

$13.64

-0.11 (-0.80%)

, BHGE

Baker Hughes

$32.02

-0.52 (-1.60%)

13:54
07/19/18
07/19
13:54
07/19/18
13:54

On The Fly: What to watch in General Electric earnings report

General Electric (GE) is scheduled to report results of its second fiscal quarter before the market opens on Friday, July 20, with a conference call scheduled for 8:30 am ET. What to watch for: GE SEPARATING HEALTHCARE, BAKER HUGHES: GE concluded its strategic review, and said it will focus on Aviation, Power and Renewable Energy, creating a "simpler, stronger, leading high-tech Industrial company." In addition to the pending combination of its Transportation business with Wabtec (WAB), GE said it planned to separate GE Healthcare into a standalone company, pursue an orderly separation from BHGE (BHGE) over the next two to three years, and make its corporate structure leaner and substantially reduce debt. GE's board unanimously approved the plans, announced on June 26. GE is targeting an Industrial net debt-to-EBITDA ratio of less than 2.5 times and a long-term A credit rating. GE also said it plans to reduce Industrial net debt by approximately $25B by 2020 and maintain more than $15B of cash on the balance sheet. GE said it expects to maintain its current quarterly dividend, subject to board approval, until GE Healthcare is established as an independent entity. GE plans to fully separate its 62.5% interest in BHGE in an orderly manner over the next two to three years. "The separation will provide BHGE with enhanced agility and the ability to focus on leading in the oil and gas industry," GE has stated. BULLISH TAKE: After the news, Oppenheimer analyst Christopher Glynn upgraded GE to Perform from Underperform based on potential for the portfolio plan to unlock some value, and diminish liabilities. Citi analyst Andrew Kaplowitz told investors in a research note that while GE's portfolio transformation will take several years and some uncertainties exist, its plans to operate as a smaller, more focused entity is a positive development that could deliver good shareholder value over time. He kept a Buy rating on shares, believing successful execution should result in "significantly reduced financial risk" that is likely to drive more stable financial results over time. GE, however, does still have a turnaround at GE Power to manage and significant incremental cost reductions to deliver by 2020, Kaplowitz pointed out. Nevertheless, the analyst, who views the company's turnaround as a multi-year process, has growing confidence that management can deliver. NEUTRAL TAKE: Goldman Sachs analyst Joe Ritchie said the leverage reduction plans are a positive, but noted that these actions will be dilutive in terms of both earnings and free cash flow. Ritchie maintained a Neutral rating and $14 price target on GE shares, noting that his target is based on a blend of EPS estimates and his sum-of-the-parts valuation, pointing out that if it was based on pro-forma estimates it would be "materially lower." BEARISH TAKE: JPMorgan analyst Stephen Tusa said what will be left of GE following the asset sales remains "significantly overvalued" based on his sum-of-the-parts analysis. The analyst sees a "reasonable bear case" that would imply $6 per share for remaining GE and a current price target of $9. Tusa kept an Underweight rating on GE shares with an $11 price target.

GE

General Electric

$13.64

-0.11 (-0.80%)

BHGE

Baker Hughes

$32.02

-0.52 (-1.60%)

WAB

Wabtec

$105.02

1.16 (1.12%)

  • 20

    Jul

  • 20

    Jul

  • 24

    Jul

GE General Electric
$13.64

-0.11 (-0.80%)

07/02/18
JPMS
07/02/18
NO CHANGE
Target $11
JPMS
Overweight
Remaining General Electric 'significantly overvalued,' says JPMorgan
JPMorgan analyst Stephen Tusa says what's left of General Electric following asset sales remains "significantly overvalued" based on his sum-of-the-parts analysis. On 2019 estimates, remaining GE is trading at a 26 times price-to-earnings ratio and a 3% free cash flow yield, both 50%-plus premiums to the sector at 16.5 times and 6%, Tusa tells investors in a research note titled "It's Not That Complicated: Simplified SOTP Suggests Remainco GE Significantly Overvalued." The analyst sees a "reasonable bear case" that would imply a $6 per share for remaining GE and a current price target of $9. Tusa keeps an Underweight rating on General Electric with an $11 price target. The shares closed Friday down 23c to $13.61.
06/29/18
SBSH
06/29/18
NO CHANGE
Target $21
SBSH
Buy
Smaller GE could bring good shareholder value, says Citi
While General Electric's portfolio transformation will take several years and some uncertainties exist, its plans to operate as a smaller, more focused entity is a positive development that could deliver good shareholder value over time, Citi analyst Andrew Kaplowitz tells investors in a research note. The analyst trimmed his price target for the shares to $21 from $22 and keeps a Buy rating on the name. He believes successful execution should result in "significantly reduced financial risk" that is likely to drive more stable financial results over time. GE, however, does still have a turnaround at GE Power to manage and significant incremental cost reductions to deliver by 2020, Kaplowitz points out. Nevertheless, the analyst, who views the company's turnaround as a multi-year process, has growing confidence that management can deliver.
07/12/18
DBAB
07/12/18
UPGRADE
Target $15
DBAB
Hold
General Electric resumed with a Hold from Sell at Deutsche Bank
Deutsche Bank analyst Nicole DeBlase resumed coverage of General Electric with a Hold rating and $15 price target, an upgrade from her firm's prior Sell rating. The analyst prefers "late-cycle CapEx-driven exposure" given "strong prospects" for continued capital spending growth over the next several years.
06/27/18
06/27/18
UPGRADE

Perform
General Electric upgraded to Perform on diminishing liabilities at Oppenheimer
As previously reported, Oppenheimer analyst Christopher Glynn upgraded General Electric (GE) to Perform from Underperform based on potential for portfolio plan to unlock some value, and diminish liabilities. The analyst notes that GE's announced break-up plans target a remaining core of Aviation, Power and Renewables, through process of Healthcare separation, exit 62.5% stake in Baker Hughes (BHGE) over two to three years, and pending transaction for Transportation.
BHGE Baker Hughes
$32.02

-0.52 (-1.60%)

06/27/18
WBLR
06/27/18
NO CHANGE
WBLR
Outperform
GE announcement starts 3-stage process to accelerate value, says William Blair
After GE (GE) announced plans for a reinvention of its portfolio with the spinoff of GE Healthcare, William Blair analyst Nick Heymann told investors in a research note that the plans should unlock value from a final restructuring of GE's business portfolio, followed by optionality to monetize its 62.5% stake in Baker Hughes (BHGE) and Wabtec (WAB). Heymann, who continues to rate GE Outperform, says the announcement has ended GE "being under siege" by investors questioning whether it can sustain its dividend while reducing debt and resolving liabilities from GE Capital, and the announcement has also started a three-stage process to accelerate shareholder value: Revaluing GE Healthcare at a much higher multiple, shrinking GE's equity base from a tax-free exchange of the Baker Hughes and Wabtec stakes, with the third stage beginning in 2021, by which time he says Power, Aviation and Renewables should be simultaneously growing.
06/26/18
STFL
06/26/18
NO CHANGE
Target $15
STFL
Hold
GE plan straightforward, but deleveraging execution still a concern, says Stifel
After GE (GE) concluded its strategic review and announced plans to distribute 80% of its healthcare unit to shareholders and sell the remaining 20%, exit its position in Baker Hughes (BHGE) over the next few years, and focus on aviation, power and renewable energy, Stifel analyst Robert McCarthy applauded management's "straightforward" plan, but said he remains concerned about execution on its intended deleveraging and liability risk that remains at GE Capital. McCarthy keeps a Hold rating and $15 price target on GE shares.
06/29/18
WELS
06/29/18
UPGRADE
Target $8
WELS
Outperform
Nabors Industries upgraded to Outperform from Market Perform at Wells Fargo
Wells Fargo analyst Judson Bailey upgraded Nabors Industries (NBR) to Outperform with an unchanged price target of $8. The analyst sees further downside risk to pressure pumping and proppant pricing and favors defensive "value" stocks that have "somewhat limited" downside earnings risk. His top four picks remain TechnipFMC (FTI), Baker Hughes (BHGE), Weatherford (WFT) and Schlumberger (SLB).
WAB Wabtec
$105.02

1.16 (1.12%)

05/22/18
STFL
05/22/18
NO CHANGE
Target $115
STFL
Buy
Wabtec price target raised to $115 after GE deal at Stifel
Stifel analyst Michael Baudendistel raised his price target on Wabtec (WAB) shares to $115 from $106 after the company announced a deal to combine with GE Transportation (GE), saying he likes the deal for numerous reasons, including the potential for very significant accretion; the potential that added Wabtec content in freight locomotives "could be immense"; the likely opportunity for facility consolidation in locations where locomotives are serviced; and his view that DOJ and other regulators should be manageable. Baudendistel keeps a Buy rating on Wabtec shares.
05/29/18
COWN
05/29/18
NO CHANGE
Target $125
COWN
Outperform
Wabtec price target raised to $125 from $99 at Cowen
Cowen analyst Matt Elkott raised his price target on Wabtec (WAB) to $125 from $99 citing its merger with GE Transportation (GE). He believes Wabtec is the most comprehensive and unique play on global rail markets and there is no direct publicly traded comp. Elkott reiterated his Outperform rating on Wabtec shares.
06/29/18
MZHO
06/29/18
INITIATION
Target $110
MZHO
Neutral
Wabtec initiated with a Neutral at Mizuho
Mizuho started Wabtec with a Neutral rating and $110 price target.

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