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General Electric: Analysts’ Recommendations

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Analysts’ recommendations

General Electric (GE) has a consensus rating of 2.76 from analysts’ surveyed by Thomson Reuters, which indicates a “hold” recommendation on the stock. After General Electric’s confirmation of the oxidation problem on the single blade of its advanced gas turbines, analysts have turned more negative on General Electric.

Now, the industrial (XLI) giant has three analysts (18%) out of 17 with “strong buy” recommendations. One analyst has “buy” recommendation on General Electric stock, 11 analysts (65%) have a “hold” recommendation, one analyst has a “sell” recommendation, and one analyst has a “strong sell” recommendation on General Electric shares as of September 24.

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Analysts’ target price

Analysts’ target price declined after General Electric’s update on June 26. The company has a consensus 12-month target price of $16.82 per share on September 24. Based on the closing price of $11.74 on the same day, the target price indicates an implied return of 43%. In the last year, General Electric stock has fallen ~53%. We’ll compare analysts target price and return potential for the peer group:

  • Honeywell International (HON): $177.32 with a return potential of 7.2%
  • United Technologies (UTX): $152.76 with a return potential of 8.9%
  • Illinois Tool Works (ITW): $152.31 with a return potential of 4.31%
  • 3M (MMM): $210.29 with a return potential of -1.51%

Analysts’ “hold” gets louder

JPMorgan Chase’s Stephen Tusa predicted that amid the fresh Power segment woes, General Electric stock might shrink to $10.0 per share at end of 2019. Tusa cut his target price on the stock from $11.0 per share to $10.0 per share. He estimated that the HA-class turbine problems could be expensive to fix. He also predicted that the issue might even compel General Electric to write down the value of certain contract assets.

Apart from GE Power concerns, Market Realist thinks that the SEC investigation into General Electric’s accounting practices is a potential bombshell. The gap between General Electric’s adjusted EPS and reported EPS in the second quarter was 171.5%. The gap is huge considering the gap between the same metric for other major industrial companies.

Surprisingly, General Electric lowered its free cash flow guidance from $6.0 billion–$7.0 billion to $6.0 billion for 2018. The company has maintained its 2018 adjusted EPS guidance of $1.0–$1.07. The move received mixed reactions from the analyst community and markets. The company still has to figure out what to do with GE Capital. Overall, analysts’ “hold” on General Electric gets louder every day.

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