Banking on General Electric (GE)

General Electric Co. (NYSE: GE) is probably thinking “Now it Europe’s turn to lose the ‘AAA’ rating.”  After all, the conglomerate still represents the broad economy by many standards.  It saw the United States lose its ‘AAA’ rating and it has even endured losing its own prized ‘AAA’ rating.  Today shares are benefitting from a key upgrade by Sanford Bernstein.

Bernstein raised General Electric Co. to ‘Outperform’ from a less optimistic ‘Market Perform’ rating.  The old price target was $19.00, still indicating about 16% upside as of yesterdays close.  The new target has been raised to $21.00 per share.  This puts the new upside of about 28.5%.

If you include General Electric’s 3.7% dividend, the new call implies more than 30% upside.  For a comparison, the consensus price target objective before adjusting for this upgrade was $20.93 for General Electric.

The research note is in agreement with us over one thing for sure: a higher dividend for 2012.  Their call is that the dividend could rise to 4% in 2012 after a review from the Fed. Part of the reason is obvious in stronger core metrics, but Bernstein also cited free cash flow and a likely stronger earnings power in key businesses.

GE’s value has been hard to argue against as far as “Value Stocks” are concerned at under 12-times earnings and under 11-times next year’s earnings.  Shares are up 2.3% at $16.71 on normal trading volume today.

JON C. OGG