UBS Reiterates Buy on General Electric (GE) Following 2Q EPS Beat
UBS reiterated a Buy rating and $32.00 price target on General Electric (NYSE: GE) following 2Q15 results. GE reported 2Q15 EPS of $0.31, beating consensus estimates of $0.28. GE raised Industrial operating EPS guidance for 2015 by $0.03 at the low end to $1.13-$1.20.
Analyst Shannon O'Callaghan commented, "2Q industrial margins came in at 16.2%, strongly beating our 15.7% estimate. Gross margins improved 60 bps y/y in 2Q despite 70 bps of pressure from negative mix as strong value gap (+60 bps) and cost productivity (+70 bps) were able to offset the negative mix. Equipment margins are now up 30 bps YTD (after being up 120 bps y/y in 1Q), which reflects negative 2Q mix from higher GEnx and Wind shipments and lower Distributed Power. Services margins are now up 130 bps YTD after being up 70 bps y/y in 1Q. Orders were strong, up 13% organically (Equipment +19%, Services +7%). Order strength highlighted by: Power & Water +22%, Aviation services +23%, and Power Generation Services +17%. Healthcare orders solid at +4% organic. Oil & Gas was slightly ahead of our 2Q estimates with revenues -4% organically (-15% reported) but operating profit +5% organically (-12% reported) driven by cost productivity. Oil & Gas orders were down 11% organically. The company is targeting $600M of cost takeout for Oil & Gas this year on the way to $1B of cost takeout."
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Shares of General Electric closed at $27.24 yesterday.