General Electric: In the Eyes of Analysts
In this part of the series, we’ll look at analysts’ recommendations for General Electric (GE). It has a consensus rating of 2.3, indicating a “buy.” Of the 15 analysts covering GE, the majority have recommended “buy.” Four analysts have recommended “strong buy,” and four have recommended “buy.” Five analysts have recommended “hold,” while two analysts have recommended “sell.”
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Peer group recommendations
Of the 16 analysts covering The 3M Company (MMM), six analysts have recommended “buy.” For United Technologies (UTX), eight analysts of 22 have “buy” recommendations. Nine of 17 analysts have “buy” recommendations for Illinois Tool Works (ITW). In the peer group discussed here, Honeywell International (HON) had the highest number of “buy” recommendations. Of 19 analysts tracking HON, 16 analysts recommended “buy.”
Should we consider analysts’ opinions on GE?
JPMorgan Chase has reduced General Electric’s 12-month price target to $22. Based on the last closing price of $26.80 on July 17, this translates into an 18% drop. JPMorgan Chase analysts expect the company’s shares to drop 20% as uncertainty about the stock has risen to the highest level seen in “decades,” according to CNBC.
GE has been taking a slew of measures to reduce costs and improve margins, including the recent proposed sale of its water business. The company’s solid emphasis on its digital business has seen a sharp rise in orders, though the business has a long way to go.
Uncertainties in the oil and gas (UGAZ) space continue to linger in 2H17. Oil prices (BHGE) haven’t yet recovered to ignite growth, as was expected earlier. While its aviation, power, and healthcare businesses continue to perform better, order backlog remains a concern for General Electric.
On the financials front, GE’s pension liabilities can’t be ignored. Its pension plans, underfunded by ~$31.0 billion as of December 31, 2016, could be a thorn in its side amid rising interest rates.
All eyes are set on John Flannery, who will succeed Jeff Immelt as CEO in August. Flannery can take credit for GE Healthcare’s turnaround. Moreover, he spearheaded GE’s growth in emerging markets, such as India. Keep your fingers crossed for Flannery.