Why This GE Analyst Is Raising Their Earnings, Cash Flow Forecasts

General Electric Company GE shares have slumped since the company reported first-quarter earnings last week. Yet GE investors are optimistic that 2021 could be the year the company finally turns the corner, and BofA Securities analyst Andrew Obin has raised his outlook for GE cash flow and earnings.

BofA On GE's Turnaround: On Monday, Obin released a new deep dive report into GE’s first-quarter numbers.

GE’s first quarter was somewhat boring, the analyst said — which is exactly what investors should be hoping for as the industrial giant’s turnaround story stays on track.

Related Link: General Electric Analyst Raises Price Target Following AerCap Deal Reports

“GE’s work to improve the linearity of cash flows and structural working capital is bearing fruit,” he said.

He said 1.1% organic margin growth in the Power segment and 3.1% margin growth in the Renewable segment are clear signs of progress.

Looking ahead, Obin raised his 2021 and 2022 EPS forecasts for GE from 22 cents and 49 cents to 25 cents and 50 cents, respectively. He also raised his 2021 free cash flow targets from $4.1 billion to $4.3 billion and his 2022 target from $5.5 billion to $5.6 billion.

See also: How to Buy General Electric (GE) Stock

GE Catalysts Ahead: GE also has at least five catalysts ahead that could drive the stock higher, Obin said:

• Growth in high-margin Aviation aftermarket revenue.
• Potential Aviation military contract wins.
• Additional Haliade-X offshore wind orders.
• Closing of the GECAS sale to AerCap Holdings N.V. AER and subsequent debt repayment.
• Strategic moves in the legacy insurance business.

GE shares are already up more than 22% year-to-date in 2021, but Obin sees more upside ahead. Bank of America has a Buy rating and $15 price target for GE stock.

GE Price Action: GE shares were trading 1.83% higher at $13.37 at last check Monday.

Benzinga’s Take: Earnings growth is always good news for a company like GE that has been shrinking for years. Yet investors must keep that earnings growth in perspective given that GE stock already trades at 18.4 times Obin’s 2023 EPS estimate.