General Electric (GE) Price Target Raised at Cowen Ahead of Q3 Print

September 28, 2021 4:45 AM EDT
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Price: $104.12 --0%

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    13 Buy, 14 Hold, 0 Sell

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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:

  1. "2nd derivative" commercial aero demand indicators are improving;
  2. Boeing hasn't delivered a 787 since June;
  3. CSA write downs will be a small (we est. sub $100M) ding to Q3 Aviation EBIT;
  4. 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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