General Electric (GE) Price Target Raised at Cowen Ahead of Q3 Print
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Cowen analyst Gautam Khanna raised the price target on the Market Perform-rated General Electric (NYSE: GE) to $108.00 per share ahead of Q3 print.
The analyst has weighed in on the Aviation and Power data points as well as on the $1.45 billion acqisition of BK Medical. On the acquisition, Khanna argues that the deal signals “FCF confidence” but it also has a “low guided return.” Ultimately, the deal is a “high opportunity cost of capital.”
Khanna also sees “mixed” power points.
“U.S. spark spreads, a proxy for IGT profitability which often precede IGT capex spending, have expanded Y/Y in C21. GE's H-Class IGT units typically are used for baseload electricity generation, assuring fairly constant/high usage. (In general, GE's H-Class service agreements generate cash inflows based on asset run-time). But, nat gas prices have soared YTD, which may reduce dispatch rates for F-Class "peaker" units. GE's H-Class installed base is fairly small (55 units) vs. its F-Class installed base (>1000 units),” Khanna said in a client note.
The analyst’s key takeaways on the aviation business are as follows:
- "2nd derivative" commercial aero demand indicators are improving;
- Boeing hasn't delivered a 787 since June;
- CSA write downs will be a small (we est. sub $100M) ding to Q3 Aviation EBIT;
- Checks indicate no major pinch points in the engine channel’.
All in all, Khanna expects the debates on GE's stock and whether it deserves a re-rating to continue.
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