Industrials

Why GE Was Added as a Top Focus List Stock at Credit Suisse

Remember that GE is set to spend massively on share buybacks with the billions of dollars it is getting from all those financial assets being sold off in its quest to become more of an industrial conglomerate.

Another boost is that the firm’s capital divestments are expected to regain momentum after a summer pause. The firm said:

We think the pace will pick up on GECC divestments, with a further $30-plus billion of deals potentially to be announced by year-end. Many of these sales should be out of the US Commercial Lending and Leasing unit business, which is critical if GE is to exit from its Systemically Important Financial Institution (SIFI) status in 2016. The sooner that GE can be de-designated as a SIFI, the sooner large share buy-backs can start (likely in the second half of 2016).

Also, the Alstom deal can now finally close. Credit Suisse thinks that further M&A could ensue from GE. The report said:

Following the EC and US DoJ’s conditional approval of the Alstom Power acquisition last week, we expect the deal to formally close in the fourth quarter of 2015. This should allow GE to pursue other industrial acquisitions, which have effectively been on hold since April 2014, when the Alstom deal was first announced. As the portfolio shifts towards a higher weighting of industrial earnings, this should help push up the overall GE valuation multiple. We would expect future M&A deals to be focused on oil & gas, aviation, and healthcare in particular.

Synchrony Financial shares were indicated down by 1.9%, at $30.53 early Wednesday. It has a consensus analyst price target of $37.80 and a 52-week trading range of $23.76 to $36.40. Recall that when Synchrony first debuted as a public company, the 125 million share initial public offering was at $23.00 per share.

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GE shares closed at $25.30 on Tuesday, and they were trading up 1.9% at $25.80 Wednesday morning. Credit Suisse’s $31.00 price target compares to GE’s consensus price target of $29.85 and to a 52-week range of $19.37 to $28.68.