Credit Suisse Still Likes General Electric, But Removes Stock From Focus List

• Shares of General Electric Company GE are up 21 percent year-to-date and trading close to their 52-week high of $30.99.
• Credit Suisse’s Julian Mitchell maintained an Outperform rating on the company, but removed it from the Focus List, while raising the price target from $31 to $34.
• The company is poised for robust earnings growth driven by the closure of the Alstom deal and various changes to its portfolio, Mitchell mentioned.

General Electric’s earnings are poised to grow in view of the closure of the Alstom SA acquisition. General Electric’s stock continues to be more attractive than most other large conglomerates in the EE/MI sector, analyst Julian Mitchell said. He added that several catalysts responsible for putting the stock in the Focus List have already played out.

General Electric is at a very early stage of boosting its gross margins and accelerating various measures including portfolio change and improvement of industrial FCF conversion. The company is capable of earning an EPS of over $2 in 2018, especially if extra industrial balance sheet leverage is applied, Mitchell stated.

The analyst believes that the sale of General Electric’s capital intensive and low growth Capital business and the redeployment of incremental capital to high margin Industrial business bodes well for the company.

“We think a premium to the S&P is warranted for GE given the very high share (80%+) of its Industrial earnings and cash flow that are Services-driven,” Mitchell added.

The EPS estimate for F2015 has been reduced from $1.32 to $1.30, while the estimates for F2016 and F2017 have been raised from $1.41 to $1.46 and from $1.68 to $1.77, respectively.