Tusa also retained his "overweight," rating on General Electric, arguing the conglomerate has "several attractive elements" in its portfolio of businesses, including a "strong and high margin" services business, "solid emerging market positioning," and a healthy R&D franchise.
Tusa argues General Electric's multiple has been dragged lower by worries over "structural changes" in the financial services industry, as well as investor difficulty in understanding how to value the company, given its complexity. There are also concerns over how it allocates its capital and its "perceived lack of leverage relative to earlier cycle industrial peers."
Nonetheless Tusa sees potential "above-average earnings growth and eventual multiple expansion," above all in GE's energy and gas turbines business. He also sees the potential for share repurchases and a "simplifying of the portfolio" through moves such as GE's gradual reduction of its stake in NBC Universal, now majority -owned by Comcast Corp (CMCSA).General Electric shares were higher by 0.92% to $18.72 in Friday morning trading. Earlier this week, GE sold $4 billion of 5- and 10-year bonds as it faces more debt maturities this year than any other company, according to Bloomberg News. Tusa also upped his price targets on Honeywell (HON), Hubbell Inc. (HUB.B) and Wesco (WCC), while lowering his target on Sensata (ST). -- Written by Dan Freed in New York. Follow this writer on Twitter.
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