GE ‘is the most expensive stock’ in industrial sector

Michael Nagle | Bloomberg | Getty Images

A monitor displays signage for General Electric Co. (GE) on the floor of the New York Stock Exchange (NYSE) in New York.

General Electric stock continues to hover near the $13 level, battered for months and with no signs of relief coming. But shares of the embattled industrial conglomerate have not fallen far enough, J.P. Morgan analysts wrote in a note Monday.

“Yes, GE is the most expensive stock in the sector,” J.P. Morgan said.

The firm has an $11 price target on the stock – a far cry from the $16 price target that J.P. Morgan had as recently as Jan. 17. At the time, the firm wrote a $16 price level was becoming increasingly difficult to justify.

J.P. Morgan now expects GE’s full year performance to be half what the company forecast in its fourth-quarter earnings report. GE expects full year 2018 earnings of $1 to $1.07 per share. Instead, the J.P. Morgan found a “more realistic and importance anchor” would be 50 cents per share.

“This is not a depressed number given limited upside in a structurally challenged power business,” J.P. Morgan said.

GE has “botched” its power division, industrial analyst Brian Langenberg told CNBC in January. Unlike healthcare and aviation, which Langenberg sees as “marquee assets,” the GE power may require a spin-off to recover.

“The power business, when they stop screwing it up, would have more value. It has a lot of potential value,” Langenberg said.

Despite GE’s upbeat outlook and focus on its restructuring effort, this year has seen little to boost shareholders’ hopes.

GE revealed two ongoing federal investigations in the first two months of 2018: the SEC investigation into GE’s accounting practices and the U.S. Justice Department investigation in connection with subprime mortgages. Poor earnings performance has heaped on further reminders of the challenges GE faces, with the most recent report again falling short of expectations.

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