Analysts React To GE's Mixed Quarter

General Electric Co. GE stock surged more than 10 percent Thursday, its best day in nine years. The strong move came following GE’s fourth-quarter earnings report in which the company reported a revenue beat and an earnings miss.

GE guided for “low-to-mid single digits” industrial revenue growth in 2019 and said its power business would endure a “flat to slightly down market” this year.

Investors were certainly pleased with the quarter, but some analysts remain skeptical of GE’s near-term upside. Here’s a sampling of what Wall Street has said about GE’s quarter.

Liquidity Not An Issue

RBC Capital Markets analyst Deane Dray said GE reassured investors that liquidity will not be a concern in the near term.

“We attribute much of the stock’s 11.7% rally on Jan-31 (up 11pp vs. peers) to Mr. Culp’s declaration that GE Capital Aviation Services (GECAS) was not for sale, which we believe quelled the anxiety that GE is suffering from a liquidity crisis,” Dray wrote in a note.

UBS analyst Peter Lennox-King said GE has clear priorities in 2019, and there were no ugly surprises in the report.

“Clearly laying out plans for $50B of Industrial divestiture proceeds (incl. monetizing ~50% of Healthcare on top of BHGE and WAB exits) is a positive, especially when set against the ~$30B in Industrial debt retirements needed to meet the 2.5x leverage target,” Lennox-King wrote.

Patience Required

Bank of America analyst Andrew Obin said GE reported another disappointing quarter from an operational standpoint, including an earnings miss and widening Power segment losses.

“We previously highlighted that GE stock has been trading with the credit spread over the past several months, and lower charge in the Insurance business and better FCF with asset divestitures in line with expectations should be well-received,” Obin wrote.

CFRA analyst Jim Corridore said the GE turnaround story will take some time to develop, but results were a positive step.

“Revenues were stronger than we expected, and GE has made progress on asset sales and repositioning of assets,” Corridore wrote.

Ratings And Price Targets

• RBC has an Outperform rating and $12 target.
• UBS has a Buy rating and $12 target.
• Bank of America has a Neutral rating and $11 target.
• CFRA has a Buy rating and $13 target.

Shares traded around $10.10 at time of publication.

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