GE shares jump again as Wall Street loves Danaher deal

A day after General Electric’s surprise announcement of a biopharma sale to Danaher, Wall Street crowed about the embattled industrial conglomerate’s $21.4 billion deal.

GE shares rose 3 percent in trading Tuesday as several analysts pointed to GE’s deal as a positive for the stock.

“In our opinion there is no fundamental case for GE’s share price to have further downside risk,” William Blair analyst Nicholas Heymann said.

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UBS analyst Peter Lennox-King believes this new source of cash for GE, as well as the benefits, is a boon for the company.

“The sale of GE BioPharma to Danaher effectively puts the leverage question to bed,” Lennox-King said.

Deutsche Bank analyst Nicole DeBlase was the odd one out among the group, however, despite raising the firm’s price target on GE to $11 a share.

“GE is left with the less attractive parts of the Healthcare business,” DeBlase said of the deal.

Here’s what major Wall Street analysts said about GE’s deal.

UBS' Peter Lennox-King – Buy rating, raises price target to $12

“The sale of GE BioPharma to DHR effectively puts the leverage question to bed … With the market now better understanding GE’s ability to reduce its leverage position, the operating fundamentals should return to the fore (along with long-term care exposure, where risk remains) … We look forward to the likely release of GE’s 10K this week, and coming increased transparency around fundamentals (which we think is much needed).”

RBC Capital Markets' Deane Dray – Outperform rating, $12 price target

“Another positive development in GE’s methodical de-leveraging initiative, with $20.5 billion of
net proceeds from the sale of Biopharma at an attractive multiple … The Biopharma deal announcement itself presents a major de-leveraging milestone thanks to the projected cash proceeds, further alleviating any investor concerns over GE’s liquidity … The fact that GE has put its Healthcare IPO on hold signals once again that there is no immediate/urgent need to generate cash at the company, and that management is willing to rethink its portfolio plans to better maximize cash proceeds.”

Cowen's Gautam Khanna – Market perform rating, $8 price target

“GE’s BioPharma sale to DHR fetched a rich valuation that goes a long way towards GE’s debt reduction, and the WAB/Transportation deal closed … On a positive note, by shelving the IPO, GE keeps a fairly high cash conversion business in the portfolio, at least for now, and allows for a more opportunistic exit of HC vs. the “fire sale” urgency that otherwise would have been conveyed to buyers/investors.”

William Blair's Nicholas Heymann – Outperform rating

“We have increased our 2019 EPS estimate to $0.71 (from $0.58 previously) to reflect the expectation that all of GE Healthcare is now likely to be retained by GE throughout 2019 until Biopharma is sold to Danaher by year-end. Perhaps in early 2020, GE will then consider the IPO of its remaining healthcare operations … by selling GE’s Biopharma business separately from taking GE Healthcare public, they are collectively now valued at potentially about $57 billion versus our estimated GE Healthcare IPO enterprise value of $46 billion-$48 billion … Despite the lack of 2019 detailed guidance, in our opinion there is no fundamental case for GE’s share price to have further downside risk: liquidity is very ample, GE’s original targeted proceeds from asset sales are now being materially expanded and completed earlier than expected, and unknown risks and litigation are being resolved in line with prior reserves.”

Deutsche Bank's Nicole DeBlase – Hold rating, raises price target to $11

“After spending more time considering all ramifications of the transaction in the context of this share price movement, we come away less positive than our first blush view … GE will retain the remaining $17bn of Healthcare revenue, which arguably diversifies future GE and provides a more stable source of earnings and cash flow – but the BioPharma business was probably the ‘crown jewel’ of the Healthcare portfolio … GE is left with the less attractive parts of the Healthcare business.”

Merrill's Andrew Obln – Neutral rating, raises price target to $13

“BioPharma sale gives visibility on leverage, unlocks value … The transaction should be well-received by the rating agencies, given better visibility on the cash injection, and more stable portfolio from the FCF perspective given Healthcare RemainCo’s strong FCF conversion (est. ~90%). We view top management retention at Healthcare post the BioPharma sale as a key risk.”

Credit Suisse's John Walsh – Neutral rating, $11 price target

“A Bird in the Hand Is Worth Two in the Bush”: With the announced BioPharma transaction, GE was able to monetize its “higher multiple” healthcare assets for ~17X EBITDA, in line with our valuation peers. … While there does not appear to be a takeout premium, there is no certainty that public markets would have valued the business at ~17X within a broader tax-free HC spin scenario. GE was also able to structure the deal to minimize tax leakage using tax loss carry-forwards and foreign tax credits.”

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