2012 Could Be GE's Year: Analyst (Update 1)

Updated to include information from William Blair analyst.

NEW YORK ( TheStreet) -- Next year looks promising for General Electric ( GE), according to Barclays Capital analyst Scott Davis, who said in a report that 2012 might be "the first year in a long time that GE Industrials outgrows its core peer group."

Danaher ( DHR) recently provided guidance of between 2% and 5% core growth in 2012, which in the best-case scenario for both companies is half of General Electric's guidance of 5% to 10%, Davis said. Honeywell ( HON) issued its guidance Thursday, which Davis expected to be between 4% and 5%. 3M ( MMM) issued core growth guidance of less than 5%, Davis added.

The rosy outlook for GE's industrial division comes from the anticipation that areas such as power generation, aerospace and health care become some of the best end markets that industrial companies will sell into in 2012.

Davis said he anticipates record U.S. wind volumes in 2012 as the production tax credit for renewable energy is set to expire in 2013. Another strong area for General Electric next year will likely be transportation, Davis said.

"GE expects that transportation should see the highest level of margin expansion among industrial businesses in 2012," Davis wrote.

Davis noted that if the Fairfield, Conn.-based multinational company can be restrained with its mergers and acquisitions and "restarts a new era of shareholder value creation and kept promises," 2012 might be a strong year for General Electric.

Davis maintained his overweight rating on General Electric.

General Electric shares are down 8.2% so far in 2011. The stock closed Thursday at $16.79.

While Davis might be bullish on General Electric's 2012 outlook, others are not. The multinational made The Street's "5 Stocks Fund Managers Hate for 2012" as $20.7 billion of the stock was dumped from institutional portfolios in the fourth quarter.

General Electric's financial services arm is also a concern as it makes up about 25% of the company's bottom line. A tough economy could hurt the unit's earnings.

And though William Blair analyst Nick Heymann also noted that General Electric's industrial division will likely grow in line or slightly outpace its competitors, he thinks 3M could catch up after the first quarter of next year. That's when 3M's electronic, electrical and communications segment will experience an inventory adjustment that could provide a 3% boost to the company's overall sales, Heymann said.

How do you think General Electric will perform in 2012? Share your thoughts in the comment section.

-- Written by Alexandra Zendrian in New York.

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