General Electric Analyst Raises Price Target Following AerCap Deal Reports

The Wall Street Journal has reported that AerCap Holdings N.V. AER is reportedly in talks to merge with the aircraft leasing business of General Electric Company GE. Both stocks traded higher on Monday morning following the report, and Bank of America analyst Andrew Obin said the potential merger-could be a win-win situation.

Simplifying GE’s Business: Obin said the sale of GE Capital Aviation Services (GECAS) for AerCap would help further simplify GE’s business, although the structure of a potential deal is not yet certain. Obin estimates GECAS has a tangible book value of about $5 billion.

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“If reports are correct, monetizing GECAS would be received positively by many industrial investors, in our view,” he said on Monday.

Obin said the aircraft leasing industry has seen a boom in competition from Asia in the past decade. Since 2008, he estimates the value of GECAS’s has declined from $49.5 billion to $35.9 billion.

Following news of the potential deal with AerCap, Obin reiterated his Buy rating for GE and raised his price target from $14 to $15. He also raised his estimate of the value of GE Capital from negative $10 billion to negative $5 billion.

Bank of America is projecting GE’s EPS will improve significantly this year. The firm is projecting 22 cents in EPS in 2021, up from just 4 cents in 2020. Obin is projecting that earnings growth will continue with 45 cents of EPS in 2022 and 62 cents of EPS in 2023 as well.

Benzinga’s Take: When it comes to GE, any deal that would help the company simplify its bloated business and improve its balance sheet is probably good news for investors. The stock rallied on Monday morning, but it is already trading at 22.4 times Obin’s 2023 earnings projections.

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