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General Electric Gains as Citigroup Resumes Coverage With 'Buy' Rating

Citigroup analyst Andrew Kaplowitz sees a "gradual but likely" recovery in GE's struggling aviation business as the bank resumes coverage with a 'buy' rating on the stock.

General Electric  (GE) - Get General Electric Company Report shares moved higher Friday after analysts at Citigroup reinstated their coverage of the industrial group with a 'buy' rating, citing a gradual recovery in its aviation business.

Citigroup analyst Andrew Kaplowitz pegged a $17 price target on GE, alongside the reinstated 'buy' rating, amid evidence of improvements across the whole of its business portfolio under CEO Larry' Culp's turnaround plans that could trigger "material upside" in GE shares. 

Kaplowitz also cited a "gradual but likely" recovery in GE's struggling aviation business, which posted an overall decline in first quarter profits of 36%, but should get a boost from the Federal Aviation Administration's approval of Boeing's  (BA) - Get The Boeing Company Report fix for an electrical issue that had grounded around 100 of its 737 MAX jets.  Boeing engines are made by GE in partnership with France's Safran SA  (SAFRY) .

General Electric shares were marked 1.3% higher in late-morning trading Friday to change hands at $13.13 each, a move that would extend the stock's year-to-date gain to around 21.5%.

Late last month, GE posted stronger-than-expected first quarter earnings of 3 cents per share, as revenues jumped 16.6% to $17.1 billion, but held off on boosting its full-year profit forecast amid the ongoing hit to its aviation business from the global coronavirus pandemic. 

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GE reiterated and adjusted earnings target of between of 15 cents to 25 cents per share, as well as industrial free cash flows of between $2.5 billion and $4.5 billion.

"As we look to the future of flight, no business is better positioned than our aviation business," Culp told investors on April 27. "In the near term, our focus is getting people back into the air safely."

"And as the market recovers from COVID, we're well placed with the largest and youngest engine platform, with more than 37,000 commercial engines and more than 60% of our fleet that has not yet had a second shop visit, underscoring the value of our platform will generate for decades to come," he added.

Earlier this year, GE sold its aircraft leasing business to AerCap Holdings of Ireland for around $30 billion, including $24 billion in cash, 111.5 million in AerCap shares and a further $1 billion that could be paid in either cash or notes.

The transaction leaves GE with a 46% ownership stake in the combined group, which will have around 2,600 commercial aircraft in service, store or on order from major carriers around the world.