Goldman Sachs Says General Electric (GE) Remains Inexpensive to Buy, Reiterates Bullish View
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Goldman Sachs analyst Joe Ritchie reiterated a Buy rating and $124.00 price target on General Electric (NYSE: GE).
The analyst comments "The bottom line is the narrative on GE has shifted (at least temporarily) from FCF to earnings as the company has effectively demonstrated its ability to de-lever faster-than-expected. In our view, the shares underperformed materially today as investors questioned the quality of the 2022 FCF guide as it includes a $3.5bn contribution from NI and $3.0bn contribution from working capital. Additionally, we spoke to several investors today that questioned the bridge to $10bn in operating income by 2023 (vs. ~$6.5bn implied by the 2022 guide). We believe these concerns can be mitigated by two factors. First, there is likely upside to the $6.5bn operating income guide, which assumes mid-teens operating margins in Aviation and marginal improvement in Power/Renewables. Second, the focus on $10bn in operating income misses the forest for the trees. After today's move, GE is trading at a 7.5% 2023 FCF yield on our numbers. Going forward, we think it will be important for management to provide greater granularity on the structural working capital improvements as well as the earnings bridge to 2023, particularly in Aviation/Renewables. Our price target of $124 implies a 5.5% 2023 FCF yield."
Shares of General Electric closed at $91.11 yesterday.
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