General Electric (GE) – Get Report shares jumped to the highest levels in more than eight months Tuesday after analysts at Oppenheimer lifted their rating on the stock, citing the ‘turnaround traction’ under CEO Larry Culp.
Oppenheimer analyst Christopher Glynn set a $12 price target for GE stock, after boosting his rating to ‘outperform’ in a research note that highlighted changes under Culp’s tenure, including a stronger balance sheet and improving industrial free cash flows.
Glynn also noted that GE’s sale of its BioPharma division to Danaher Corp. (DHR) – Get Report, which closed in March, has helped reduce overall debt by around $13.3 billion, with near-term liquidity allowing for the funding of pension obligations or the retirement of preferred stock.
“Operationally, GE has clearly set a positive direction with broadening momentum, on diligent and better-focused restructuring and cultural decentralization/accountability taking hold,” said Glynn. “GE continues to emphasize a long game of inches, but we also believe the pace of manifest improvements picking up, as lean becomes culturally reinforcing and Culp’s turnaround gaining traction.”
GE shares were marked 4% higher in pre-market trading Tuesday to indicate an opening bell price of $10.47 each, the highest since March 5 and a move that extends the stock’s six-month gain to around 54%.
Investors were also tracking a story from the Wall Street Journal that suggested Culp was preparing deeper jobs cuts in the group’s aviation division, which saw revenues plunge 39% last quarter to $4.9 billion as the continued grounding of Boeing Co. (BA) – Get Report 737 MAX, as well as significant slump in demand for passenger aircraft, hammered the unit’s op line.
Late last month, Culp said industrial free cash flow will rise to ‘at least $2.5 billion in the fourth quarter,’ and continue to be ‘positive in 2021’ after the group posted a surprise third quarter profit of 6 cents per share.
Group revenues, GE said, fell 17.1% to $19.4 billion, a figure that topped analysts’ estimates of an $18.7 billion tally.
Industrial organic sales were down 12%, GE said, while organic orders slumped 28%. Industrial free cash flow for the third quarter was tabbed at $513 million.