General Electric Upgraded At William Blair Amid 'Transformation'

In a report issued Monday, William Blair analysts Nicholas Heymann, Brendan Shea and Ross Sparenblek upgraded General Electric to Outperform, noting that, as the company’s much discussed transformation to the global leader in base infrastructure takes form, a different kind of industrial growth company is emerging and, at the time, few seem to understand its potential.

The firm sees sources for further upside potential in earnings from the Alstom Energy purchase and GE’s data analytics business.

Looking Ahead For GE

But, even though the Outperform rating is based on the company’s near-term upside potential, the experts believe the stock could double in price, to about $60, by 2020. They added that, while the target may sound “preposterous,” they believe “GE’s ability to potentially double its EPS, ROE, and ROTC from 2015 to 2020” makes it highly feasible.

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Now, GE seems to be “approaching the inflection point in its transformation where internal company actions rather than external factors will increasingly govern the speed and ability with which GE completes its transition into the premier base infrastructure company in the world,” the analysts believe.

Overall, GE’s great growth potential comprises four elements:

• 1. A conservative financial structure and base growth expectations.
• 2. A well-funded share repurchase program.
• 3. The “low-risk” acquisition of Alstom Energy.
• 4. GE Digital, especially in the field of industrial data analytics.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.