General Electric Rises Sharply After Barclays Upgrade

General Electric (GE) shares rose almost 3% Monday after analysts from Barclays boosted their price target on the stock as the group attempts to realign its restructuring plans under new CEO Larry Culp.

Barclays raised its price target on the group to $16 a share, and upgraded its rating to "overweight", as it argued that only "the most hardened skeptic might want to re-consider following the CEO change". Barclays noted that GE's current enterprise value is almost entire comprised of its Aviation and Healthcare divisions and argued that investors are essentially owning the group's Power, BHGE, Renewables, Lighting Transportation assets "for free" thanks in part to the stock's 25% year-to-date decline.

GE shares gained 2.8% to $13.55 early Monday.

$GE 3 upgrades in one week $$$$ Barclays overweight PT $16 $$$ pic.twitter.com/qKQZ4RvPDE

— Sean (@seanandlizs) October 8, 2018

Last week, RBC Capital boosted its rating on the stock to "outperform", with a price target of $15 per share, following news that Culp was tabbed to replace outgoing CEO John Flannery after just over a year in the job.

The bombshell announcement, which included a warning that weakness in its GE Power business will make it miss 2018 free cash flow and earnings guidance as it takes a $23 billion goodwill hit to the struggling division, sent shares surging but also raised questions over the fate of the group's long-standing dividend.

However, Moody's Investors Service put that cash payout in doubt when its put GE's A2 credit rating on review for possible downgrade, noting that, among a "range of issues,", will be "the impact on GE's earnings and cash flow prospects of the continuing deterioration in its Power business, which is likely to persist for some time. 

"The review will also assess other measures that could improve GE's free cash flow relative to its debt balance," Moody's added. "These could include measures to address the very substantial pension deficit, GE's $4.2 billion annual dividend, improving working capital or investing efficiency. The potential for disruption, or acceleration, of efficiency programs already underway with another change at senior management level will be assessed."

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