Check out today's top analyst calls from around Wall Street, compiled by The Fly.
ANALYSTS REACT TO GE EARNINGS REPORT: In a post-earnings research note titled "The Math Still Matters," JPMorgan analyst Stephen Tusa said he came away from the General Electric's (GE) Q4 report scratching his head at the stock reaction. The analyst attributed the rally to the company's "incrementally better" free cash flow, the "nominal nature" of the Q4 insurance charge, and credibility of the CEO. However, Tusa views the key aspect as more clarity on de-leveraging around where the "value" of the assets is going, and then the "ongoing lack of visibility on the simple math that shows a negative run rate" on enterprise free cash flow fully diluted for portfolio moves. Even assuming recovery in Power, "one has to make highly optimistic assumptions to get back to a run rate that supports anything near $10" per share, Tusa writes. In vowing to "stick to the numbers," Tusa says his read through from GE's Q4 results reaffirms his "well below-consensus model." Overall, "there was a lack of tangible details on key items," Tusa contended. He kept a Neutral rating on General Electric with a $6 price target.
William Blair analyst Nicholas Heymann ascribed General Electric's 12% share price rise following its Q4 results to an "inflection in investor sentiment, not short-covering." He believes this occurred in mid-December after the stock bottomed at $6.66. GE ended 2018 "strongly" with "notably better-than-feared" free cash flow, year-over-year organic Industrial growth of 8% for sales and 4% for orders in Q4, and "slightly positive" net price in 2018 that sequentially improved in the second half, Heymann wrote in a post-earnings research note titled "Up, Up, and Away: New CEO Accelerating Turnaround Pace; Free Cash Flow Better than Feared; Largest Litigation Resolved." The analyst also believes the turnaround of GE Power "is in the very early innings with the process, timing, and 2019 performance yet to be fully detailed." Despite the lack of 2019 detailed guidance, there is no fundamental case for GE shares to have further downside risk, says Heymann. The company's liquidity is "ample," its original targeted proceeds from asset sales are now being expanded and completed earlier than expected, and unknown risks and litigation are being resolved in line with prior reserves, the analyst contends. He keeps an Outperform rating on General Electric. Heymann continues to believe GE's underlying intrinsic value, assigning no value to Power, is somewhere in the range of $14- $16 per share. The analyst sees this range as a "highly feasible base case valuation" for GE's share price over the next 6-12 months.
PIPER SAYS AMGEN ACQUISITION OF ALEXION WOULD MAKE SENSE: While most investors anticipate Amgen (AMGN) could be shopping for smaller, bolt-on deals amid increased investor and press speculation that it is now an active acquirer, a larger deal with more near-term accretion potential may make more sense, Piper Jaffray analyst Christopher Raymond wrote in a research note partially titled "Go Big or Go Home?" He thinks a potential Amgen for Alexion Pharmaceuticals (ALXN) deal "could actually make a lot of sense." Even at levels approaching $200 per share for Alexion, Amgen "could make a strong argument for a business combination," says Raymond. The analyst admits that some "bolt-on deals have been bandied around" by investors that "arguably make sense" for Amgen, including Biohaven Pharmaceutical and Amarin (AMRN). However, none of these options on their own get Amgen "to where they need to be to address the growth challenges of the legacy franchises," Raymond argues. He thinks a better deal for the company may be Alexion, which would bring in a "long-tailed asset" with Soliris/Ultomiris, an area Amgen has already approached with its Soliris biosimilar effort. The analyst's math has the potential deal being accretive next year, growing to 20%-plus accretion by 2024 for Amgen, even at a takeout price approaching $200 per Alexion share. Raymond kept Overweight ratings on both companies. In late morning trading, shares of Alexion are higher by 1.5% to $124.85.
SOCIETE GENERAL CUTS GOLDMAN SACHS, MORGAN STANLEY TO SELL: Societe Generale analyst Andrew Lim downgraded Goldman Sachs (GS) and Morgan Stanley (MS), both to Sell from Hold, citing his view that the credit cycle deterioration "has already been set in motion" and that it will pay to be defensive for the rest of 2019. Goldman and Morgan are much more exposed to pressure on market-sensitive revenues as purer investment banks, Lim told investors. He does not have any Buy ratings on big U.S. banks, but continues to favor holding positions in Bank of America (BAC) and JP Morgan (JPM), which Lim views as the most defensive large cap U.S. banks, he concluded.
JPMORGAN CUTS DOWDUPONT TO NEUTRAL: JPMorgan analyst Jeffrey Zekauskas downgraded DowDuPont (DWDP) to Neutral from Overweight and lowered his price target for the shares to $53 from $65. After reducing his EBITDA estimates sharply, the analyst said he prefers to wait for opportunities to purchase the individual pieces of DowDuPont as they spin free. Given investor wariness over the downward volatility in the Dow Material Sciences financial returns at the outset of 2019 and investor caution over owning more cyclical businesses late in the economic cycle, it may be the case that pressure is placed on the valuation of the Dow Materials Science operation as it spins free, Zekauskas told investors in a research note. If so, he sees risk that DowDuPont may trade at a wider discount to its sum-of-the-parts valuation over a shorter period of time.
GE Aerospace
-0.03 (-0.29%)
Amgen
+0.3 (+0.16%)
Acquired by AZN
+1.32 (+1.07%)
Amarin
-0.27 (-1.54%)
Morgan Stanley
+0.31 (+0.73%)
Goldman Sachs
+0.86 (+0.43%)
Bank of America
+0.35 (+1.23%)
JPMorgan
+1.01 (+0.98%)
DowDuPont
-0.44 (-0.82%)