BofA/Merrill Lynch Sees Big Upside in 3M, Still Agressive on GE

General Electric Co. (NYSE: GE) managed to hit what was almost a four-year high yesterday as shares crept above $22.00 for the first time since the panic selling of the recession took shares from $30 down to $20 and then ultimately under $10. Now we have Bank of America/Merrill Lynch issuing a new Buy rating on GE. The $25 price target is above the $23.08 consensus from Thomson Reuters.

BofA’s new coverage is actually a reinstated coverage. The firm believes that GE’s stock performance has closely tracked its return on equity and it expects that GE will improve from 10% ROE during the 2009 to 2010 trough and above the 12% in 2011. The belief is that the ROE will grow to 15% in 2013 and 16% in 2014. The gains are based on improvements at GE Capital, a greater contribution from higher margin service businesses, and ultimately from better pricing in late-cycle industrial businesses tied to gas. Today’s report even said that more regulatory visibility at GE Capital likely means that the parent company will be able to keep raising its dividend in line with its earnings, as well as supporting share buybacks and mergers and acquisitions.

BofA/ML is also talking up 3M Co. (NYSE: MMM) as it reinstated 3M with a Buy rating and a $113 price target.

In short, BofA is calling for 13.6% upside in GE and is calling for upside of almost 23% in shares of 3M.

JON C. OGG