Morgan Stanley Previews GE's Q3, Cuts Price Target To $31

Previewing General Electric Company (NYSE: GE)'s third-quarter results, Morgan Stanley lowered its estimates and consequently its price target as well.

3Q Drops Below Consensus

Nigel Coe, an analyst at the firm, said he is lowering his third-quarter earnings per share estimate by a penny, below the consensus, citing O&G headwinds and negative power price/mix. However, the analyst sees 0–1 percent revenue growth due to phasing of gas turbine shipments and continued strong growth in power services and aviation services.

Largely Steady On FY16, FY17

The analyst said he is steady at $1.50 for 2016 and has largely maintained his 2017 earnings per share estimate at $1.67, as weaker transportation and aviation sales are offset by stable aviation margins, assumed payback on aggressive restructuring and footprint actions on O&G, lighting and healthcare segments.

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FY18 Estimate Lowered

However, Morgan Stanley lowered its 2018 earnings per share estimate to $1.84 from $1.91, further below the company's $2 target. The firm premised the action on risk to aviation margins arising out of the change in the revenue recognition accounting and scale back on its $35 billion share buyback plan.

That said, the firm believes the company will maintain its long term targets. Nevertheless, the firm also believes the stocks could continue to de-rate as consensus estimates re-base lower. The price target stands trimmed by a dollar to $31.

At time of writing, shares of General Electric were down 0.51 percent at $29.35.

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