GE can minimize debt, enhance valuation by 2020, UBS says
traders, mentioned UBS analyst Steven Winoker in a observe on Monday. That concern was abundantly clear in suggestions from purchasers, he mentioned.
“Whereas GE has been beneath appreciable strain currently, we keep our conviction that the inventory presents a long-term capital appreciation alternative,” Winoker mentioned. “It will not be fast, and it’s more likely to be unstable, however we see a path to enchancment for each leverage and valuation.”
UBS laid out one of many paths new GE chairman and CEO Larry Culp may take. On this state of affairs, UBS mentioned GE would get about $33 billion from introduced and coming asset gross sales. Winoker’s outlook has GE paying down $5.four billion in debt and obligations and transferring about $21 billion in money to closely levered GE Capital.
“The web is a ~$43 billion enchancment within the Industrial web debt place,” Winoker mentioned.
However GE nonetheless has a variety of dangers to bettering its leverage.
“Litigation and investigation settlements may additionally are available greater than we at the moment forecast,” Winoker mentioned.
Each the SEC and DOJ expanded their investigations into GE’s accounting practices after GE took a $22 billion cost within the third quarter associated to acquisitions made in its energy enterprise. GE reserved $1.5 billion in April for a possible authorized settlement of the DOJ investigation.
GE Capital may additionally “see an extra deterioration” in money era, Winoker mentioned.
UBS has a purchase ranking and a $13 value goal on GE shares. The inventory was up 1.three p.c on Monday, at $8.12.
– CNBC’s Michael Bloom contributed to this report.