A GE Aviation Test Operations facility.
Luke Sharrett/Bloomberg
General Electric stock is higher Tuesday. The market is up, as well, and upbeat company-specific Wall Street commentary is also helping. Bank of America analyst Andrew Obin wrote Tuesday that GE is making progress on “several fronts.”
GE (ticker: GE) stock is up 4.7% in midday trading. The S&P 500 and Dow Jones Industrial Average are up about 1.3% and 1%, respectively.
It’s a bigger-than-market move for the industrial conglomerate, and the reason for improving analyst sentiment is the annual report. GE filed its 2021 report on a form 10-K with the Securities and Exchange Commission this past Friday. Analysts have been studying the document for a couple of days.
“The 2021 10-K filing highlights GE’s progress in reducing legacy issues,” wrote Obin in a Tuesday report.
GE is ending the sales of its accounts receivable, a practice called factoring receivables that the company had used to bring in cash to the industrial operations. GE Chief Financial Officer Carolina Dybeck Happe has said GE became too reliant on factoring, and end-of-quarter billing in its management of cash and sales numbers. Ending factoring makes the company’s figures more transparent.
What’s more, retiree pension plans are now back above 80% funded on an accounting basis. That’s a healthy level of pension funding, and GE won’t have to contribute as much cash to bolster it.
Obin also pointed out that corporate costs are falling and, most important, the aviation recovery is on track. Aviation orders grew 19% year over year in 2021 and “drove backlog to exceed pre-Covid levels,” wrote the analyst.
He isn’t the first to comment on GE’s annual report. Wolfe Research analyst Nigel Coe wrote Monday there are “more green flags than red” in the annual report. He added the report shows how GE has morphed into a “normal” company. In the past, GE annual reports were more complicated.
Simplification seems to be doing the trick for GE stock Tuesday.
Coe and Obin, for their parts, both rate GE stock at Buy. Coe’s price target is $127, and Obin’s target is $132. Both are a more bullish than the average analyst. The average analyst price target for GE stock is $117 a share, implying gains of about 17% from recent levels.
Overall, about 71% of analysts covering GE rate shares at Buy. The average Buy-rating ratio for a stock in the S&P 500 is about 58%.
Write to Al Root at [email protected]
