RBC Capital Neutral on GE's (GE) Q3 Report, Outlook; Reaffirms at 'Outperform'
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RBC Capital affirms General Electric (NYSE: GE) at Outperform with a price target of $36 following Q3 results and updated outlook released earlier Friday. The firm's overall feeling on the report was neutral.
Analyst Deane Dray summarized:
The bottom line is that GE is holding up relatively well in a slower-growth macro, in our view. The headline 3c beat vs. our estimates was paced by 1c on the Industrial operating line, 1c better on GE Capital, and 1c contribution from tax. As always, there are puts & takes in the composition of the earnings release today. On balance, we would expect a flattish stock reaction to modest disappointment on the light Industrial revenues that came in -1.3% below our estimate, lowered guidance for organic growth, and commentary about 2018 that does not mention a $2 EPS target, but no one should be surprised that the 2018 bridge is now highlighting oil & gas end market pressures. The key positives were the broadly in-line results across the segment operating earnings (especially given the macro angst), a 22% buyback boost, and cash flow now ahead of the initial 2016 plan.
We note that the narrowed 2016 guidance kept the midpoint unchanged, despite now absorbing 4c-6c of FX headwinds vs. the original expectation for just 2c. We continue to like GE shares here as a transformation re-rating story, as a defensive name with +10 quarters of backlog, attractive dividend yield, and appeal in a risk-off environment.
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