GE draws upgrade to outperform at JPMorgan, ahead of its split into two companies

By Steve Gelsi

Industrial giant praised as 'premium large-cap name' in commercial aerospace

General Electric Co.'s stock added to its gains Friday as JPMorgan Chase upgraded the industrial company to overweight and boosted its price target by $14 to $180 a share despite recent outperformance by the stock.

At the closing bell, GE's stock (GE) moved up by 0.9% to bring its gain for the week to 5.9%.

The stock is now up by 31.6% so far in 2024, compared to 2.7% increase by the Dow Jones Industrial Average DJIA and a 7.4% increase by the S&P 500 SPX.

While JPMorgan analyst Seth Seifman said the stock's current valuation is the only obstacle, he's upgrading GE instead of trying to time the market because "the company's fundamental strength wins out."

The move comes less than a month after General Electric Co. will split into GE Aerospace and GE Vernova - a renewable-power-generation company - on April 2.

Also read: GE sets date for final spin-off: What that means for the stock

Both units met with investors this week as they prepared for their separation.

"We see GE Aero as the premier large cap name in commercial aerospace with regard to 1) the business, 2) where the business is in the cycle, 3) the balance sheet, and 4) the management team," Seifman said.

GE's forecasts did not differ dramatically from JPMorgan analysts' projections, "but they are still appealing, with multiple years of growth and margin expansion," Seifman said.

Growth in GE's backlog of new engines plus maintenance needs for its 44,000-engine commercial engine fleet provides a visible opportunity for the company.

"The fact that this installed base is growing is quite important because this provides the foundation for future earnings," Seifman said.

The company also has far less debt than Boeing Co. (BA) and RTX Corp. (RTX) which provides flexibility for cash deployment, he said.

GE's Vernova also "looks promising based on rebounding margins and cash flow, as well as having diversified exposure to the long-term energy transition," Seifman said.

On April 2, the 150-year-old company, which was co-founded by Thomas Edison, will stop being GE and become GE Aerospace. The company, which will still have its stock traded on the New York Stock Exchange under the ticker symbol GE, will provide engines, components and systems for use in commercial and military aircraft.

The rest of the company will be spun off as a fully independent GE Vernova, which will include the current company's power, wind and electrification businesses. GE Vernova's stock will be traded on the NYSE under the ticker symbol GEV.

The moves follow the spin-off of GE's healthcare business as GE HealthCare Technologies Inc. (GEHC) in December 2022.

Tomi Kilgore contributed

-Steve Gelsi

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03-08-24 1614ET

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