"Top line 4-7% industrial segment guidance for 2014 is better than peers this reporting season, and while we have heard this same better than peer number in prior years only to fall short, this one does seem more believable to us," Winoker wrote in a client note on Wednesday, although he also noted that "for more than a decade, our measures of productivity at GE underperform other industrial peers (investing in growth without getting it really)."
Winoker wrote that "as much as we like elements of the company's story, we believe the premiums we are applying [to get to the $27 price target] are appropriate at this point and have a challenge seeing EPS going much beyond our $1.81 number in 2015 (perhaps another 10% to $2 with additional buybacks, M&A and flow through of cost reduction to margins faster). That would be required for us to drive our target price higher."
Citigroup analyst Deane Dray is more upbeat, writing in a client note Friday that "GE's record $229 bil backlog and late-cycle
earnings visibility position it nicely at this point in the cycle."
Dray reiterated his $32 price target for GE and said the stock remained his "top pick" among diversified industrial companies. His price target for GE "assumes the shares trade at a 5% discount to our 17.0x target group multiple on 2015E EPS. GE's historical relative P/E range versus peers is a 25% discount to a 5% discount."
Citigroup estimates GE will earn $1.70 a share during 2014, with EPS rising to $2.00 in 2015.
Shares of GE have returned 34% this year through Wednesday's close. The shares trade for 15.8 times the consensus 2014 earnings estimate of $1.73 a share, among analysts polled by Thomson Reuters, and for 14.6 times the consensus 2015 EPS estimate of $1.88.
GE's stock was down 0.7% in late morning trading to $27.00.
The following table shows GE's outperformance this year against the Dow Jones Industrial Average
GE data by YCharts
Interested in more on General Electric? See TheStreet Ratings' report card for this stock.
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