How GE Power Will Drive General Electric Higher

By Chris Lange Updated Jan 12, 2:07PM EST · Published Mar 9, 12:25PM EST

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How GE Power Will Drive General Electric Higher — © Thinkstock

[cnxvideo id=”655416″ placement=”ros”]General Electric Co. (NYSE: GE) shares have fallen off a little in 2017, but this could be changing in the near future. Although the stock has only dropped just under 6% in this time, one key analyst sees significant upside in this iconic industrial driven by its Power segment.

Credit Suisse reiterated an Outperform rating with a $34 price target, implying an upside of 14% from Wednesday’s closing price of $29.80.

After a weak fourth quarter, the Power business is poised for a recovery, despite the weak heavy duty gas turbine environment, as GE is taking advantage of its broader suite of products post-Alstom. The company is now selling more Power Island systems, rather than gas turbines on their own, in addition to the Services business, which continues to grow in the mid-single digits (Alstom increased the installed base by roughly 50%).

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The brokerage firm commented in its report:

The Power segment continues to be the main driver behind GE’s cash conversion improvement, and Mr. Steve Bolze laid out a plan to improve his segment’s conversion by 15% this year. Renewables continues to grow healthily, with double digit organic revenue and operating profit growth (as a reminder, Power & Renewables comprise 32% / 31% of Industrial Revenues / EBIT). The company also announced the sale of its Water & Process Tech business to Suez for a higher multiple / price than our initial expectations. The stock has been very weak for the last 12 months, but we think the pro-cyclical cross-sector rotation has largely run its course, and GE is running out of shoes to drop.

The company also gave a quick update to its Baker Hughes Inc. (NYSE: BHI) merger. GE Chief Financial Officer Jeff Bornstein presented an update to Baker Hughes, maintaining the 2017 guidance as reported at the December Analyst Day and the fourth-quarter earnings, including commentary that the additional $1 billion of cost-out is seeing very rapid progress. As regards the Baker Hughes merger, GE continues to expect the deal to close by midyear.

Shares of GE were last seen at $29.80 on Thursday, with a consensus analyst price target of $33.73 and a 52-week trading range of $28.19 to $33.00.

Baker Hughes traded down 1.3% to $56.95, with a consensus price target of $69.88 and a 52-week range of $38.16 to $68.59.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.