GE (GE) Surges Higher As Analyst Pounds The Table, Shorts Run

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GE Hot Sheet

Rating Summary:
9 Buy, 1 Hold, 0 Sell

Rating Trend:

Up

Today's Overall Ratings:
Up: 20 | Down: 11 | New: 38

Shares of General Electric (NYSE: GE) are higher today after analysts at JP Morgan became more bullish on the stock, raising their price target to $22 - matching a Wall Street high. In addition, shares are benefiting from short covering as the stock has now moved over the $16 level. Shares of GE are currently 5.4 percent higher to $16.29. The move in GE is also contributing to a move higher in the Dow 30.

In its report today, JP Morgan analyst C. Stephen Tusa called GE his Top Pick in the sector and said shares do not reflect the potential significant earnings leverage at GE Capital.

Earnings at GE have been down by provisioning, but this could peak in the 1st-half of 2010, according to the firm. With the scaling back of competition (i.e., TXT, CIT, securitization), GE Capital should have a favorable impact on net interest margin which could drive normalized earnings at GE Capital to about $9.5 billion.

On the organic sales outlook, the firm is looking for organic sales declines of 3% in 2010E versus management guidance of a 0-5% decline, with a recovery to 4% growth in 2011.

On the earnings outlook for GE, the firm said their "base case" assumes EPS of $0.92 in 2010 which should increase to $1.80 in 2013. An upside case suggest EPS could be $1.05 in 2010 and $2.10 in 2013.

While GE has historically traded at a 30% premium to the multi-industry group, they suggest a in-line multiple is a more appropriate today. Even with this in-line multiple shares are seriously undervalued, according to the firm.

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