With General Electric’s (NYSE:GE) Power unit poised to beat the Street’s outlook and a vaccine for the novel coronavirus looking more imminent than ever. GE stock continues to be very appealing for longer-term investors.
Also, positive for the shares is the fact that some analysts appear to be be bullish on it, despite the pandemic.
Power: Well-Positioned to Beat the Street’s Outlook
Most analysts appear to be bearish on GE’s Power unit, viewing it as unprofitable and a negative catalyst for the shares.
But Siemens Power, which Barron’s recently described as “closely matched with GE Power in size and scale,” is expected to report profit margins above 8% over the longer term, up from 0% this year, its parent company, Siemens (OTC:SIEGY), recently reported. Further, Siemens expects global demand for electricity to increase “about 2% a year on average for the foreseeable future,” Barron’s reported.
Meanwhile, GE’s Power unit continues to make meaningful deals around the world. Earlier this month, the unit agreed to supply cycle blocks. “Ten gas turbines… five steam turbines, 15 generators, and ten heat recovery system generators,” – for two major power plants being built in Taiwan.
In late August, financing was obtained for a $1.3 billion Illinois plant that ” will use GE’s latest high-efficiency HA turbine technology.”
And as I pointed out in my Aug. 31 column, GE last month signed a huge, $1.2 billion deal to supply Iraq with power-plant equipment.
Also boding well for the Power unit and GE stock is a recent forecast by the International Energy Forum for demand for natural gas to surge tremendously starting next year.
PJM “lists 33 gas-fired power projects either under construction, or under construction and partly in-service, in the New Services Queue on its website.” This is according to POWER Magazine. It’s unlikely that such a big organization would be an outlier when it comes to natural gas usage.
A Vaccine Is Likely to Arrive Soon
The only major safety issue that’s been reported so far, involving a woman who was in a trial of AstraZeneca’s (NYSE:AZN) vaccine, was apparently not considered by independent experts to be a major issue, as testing of the product has resumed in the U.K.
In another encouraging sign, Pfizer’s (NYSE:PFE) CEO, Albert Bourla, recently stated there’s “a good chance” the data on its vaccine will be unveiled around the end of next month.
Those participating in the study of the vaccine had to be at least 18 years old. Bourla reported that the company would begin testing the vaccine on 16 and 17-year-olds.
Before the pandemic, GE’s Aviation unit was its largest and most profitable division. Once a vaccine is given to a large portion of the developed world’s population, he demand for flights should soar.
Analysts Are Upbeat on GE Stock
Barclays analyst, Julian Mitchell, believes that GE’s Power unit is worth $2.50 per share, versus the current stock price of just over $6. The analyst has a $9 price target on the name.
Also bullish on GE stock is InvestorPlace analyst Luke Lango who believes that the shares “could double over the next 18 months.” Likewise, InvestorPlace columnist Thomas Yeung, a chartered financial analyst, recently estimated that the shares are worth $16.50.
The Bottom Line
Mounting evidence suggests that much of the Street has greatly underestimated GE’s Power unit. The imminent coronavirus vaccine. will give the aviation division a big boost. Finally, more analysts seem to have become bullish on GE stock.
On the date of publication, Larry Ramer held a long position in GE.
Larry has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.