General Electric Bull Bear Case
Bull/Bear Case Bull Bear Target price: $29.50 Target price: $19.50 Basis: P/E multiple of 12x. GE Industrial EPS of $1.05. GE Capital Services' performance at 1.3x TBV. Basis: P/E multiple of 17.5x. GE Industrial EPS of $1.15. GE Capital Services' performance at 2x Tangible Book Value (TBV). Assumptions: P/E multiple of 17.5x is the higher end multiple of dividend-paying diversified machinery companies. Assumptions: P/E multiple of 12x is the lower end multiple of dividend-paying diversified machinery companies. GE Capital's multiple of 2x TBV is the upper end of fair value GE Capital's multiple of 1.3x TBV is at the lower end of fair value multiples for large- cap US banks. multiples for large-cap US banks. Strong demand from China and Africa. Acceleration after the An economic downturn, which is one-third as bad as the mid-cycle slowdown, with organic growth for GE remaining stable at 6%. one in 2009, resulting in organic growth at GE Industrial falling 5%, and operating margins reducing by 15bps. Margins will expand by 70bps due to better pricing. GE Power & Water fails to pick up orders and faces a delay in shipments. Acceleration in healthcare and aviation is expected to be balanced out by deceleration in the energy segment. Downside for GE is limited because of a well-diversified portfolio and its track record of supporting margins in downturns. Base Case Target Price: $23.90 Basis: P/E multiple of 15x GE Industrial EPS: $1.10. Assumptions: GE Capital Services is expected to be valued at a multiple of 1.5x Tangible Book Value* (TBV). P/E multiple of 15x is the forward multiple of S&P 500. Modest increase in new orders, driven by growth in China. Industrial margins are expected to expand 80bps, mainly due to better pricing in the Aviation and Energy segments. Book value of common equity less goodwill and other intangible assets SOURCES: BIDNESS Company Data, SEC filings, Bloomberg Professional Services etc. DISCLAIMER: Bidness Etc(TM) and related marks are owned by Bidness Etc. Any other trademarks appearing on this website are the property of their respective owners, and are not used to indicate the origin of goods or services offered or provided by Bidness Etc herein or to suggest approval for or affiliation with Bidness Etc.
General Electric Bull Bear Case
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