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Wall Street Sees Over 20% Upside Potential in GE

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Bullish recommendation

General Electric (GE) has received a consensus “buy” recommendation from analysts polled by Reuters. Five out of 20 analysts have given it “strong buys,” five have given it “buys,” eight have given it “holds,” and two have given it “strong sells.”

The stock’s one-year target price of $12.17 indicates a potential upside of 20.5%.

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GE stock has risen ~39% year-to-date and has significantly outperformed the returns of other industrial conglomerates (XLI). United Technologies (UTX), Honeywell International (HON), and Caterpillar (CAT) have returned 23.3%, 21.3%, and 9.6%, respectively, in the same period.

It seems that analysts are bullish about the entire industrial sector, as they’ve provided “buy” recommendations on the majority of GE’s competitors. However, analysts’ one-year target prices on GE’s competitors reflect minimal potential upsides.

Five out of 22 analysts have given United Technologies “strong buy” recommendations, eight have given it “buys,” and the remaining nine have given it “holds.” Its one-year target price of $141.67 represents a potential upside of 7.9%.

Seven of the 23 analysts covering Honeywell have given it “strong buy” recommendations, 12 have given it “buys,” and four have given it “holds.” Analysts’ one-year target price of $165.74 on the stock reflects a potential upside of 3.4%.

Seven out of 28 analysts have given Caterpillar “strong buy” ratings. Eight have given it “buys,” 11 have given it “holds,” and the remaining two have given it “sells.” Analysts have a consensus target price of $142.86 on the stock, which depicts a potential upside of 2.6%.

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Attractive valuation

Last year’s ~57% plunge in GE stock has made its valuation attractive in the industrial sector. At current market prices, GE is trading at a price-to-book value ratio of 2.84x, a significant discount to the industrial sector’s average of 4.19x.

The stock is also trading at a lower price-to-book value multiple than its top peers. Its primary competitors United Technologies, Honeywell, and Caterpillar are trading at multiples of 2.95x, 6.42x, and 5.71x, respectively.

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