GE Stock Gets a Big Cut but Investors Shrug It Off

Text size

The stock market is said to be forward looking. That seems to be the case headed into second-quarter-earnings season. Stocks are already down and now analysts are cutting estimates headed into the reports.

Friday, Barclays analyst Julian Mitchell previewed earnings for the industrial companies he covers. Most of his earnings estimates came down, so did many target prices. He’s worried about demand.

Notably, Mitchell cut his

General Electric

(ticker: GE) price target to $81 from $96. His 2022 earnings-per-share estimate came down to $2.54 from $2.74. Mitchell rates GE stock at Buy.

Estimate cuts and target-price changes can move stocks, but a lot is already reflected in GE shares. The stock has had a tough 2022 already, falling about 32%.

GE stock is up about 1.5% in Friday trading. The

S&P 500
and

Dow Jones Industrial Average
are both up 0.2%.

The problems Mitchell sees aren’t GE-specific. He cut target prices on many stocks. Mitchell also rates

Honeywell International

(HON) shares Buy. His price target for that stock came $204 a share from $220. Mitchell shaved four cents off his 2022 EPS estimate which now sits at $8.62.

Overall, he cut the price targets for 25 of 26 stocks he covers, sparing only

Pentair

(PNR). Mitchell lowered

Pentair
’s
2022 EPS estimates to $3.69 from $3.72, however. He rates Pentair stock at Hold.

---

Newsletter Sign-up

The Barron’s Daily

A morning briefing on what you need to know in the day ahead, including exclusive commentary from Barron’s and MarketWatch writers.

---

The only stock that didn’t see a decline in estimated 2022 earnings was

Vontier

(VNT). Mitchell expects it to generate EPS of $3.22. His target price for that stock still went down to $33 from $39, but it still has a Buy rating.

“We lower estimates for most of our coverage, as wider cracks emerge in the [industrial] demand picture,” wrote Mitchell. Supply-chain problems were the story of the first half of 2022.

High logistics prices and shortages of things such as semiconductors added costs and constrained production. Now Mitchell sees demand weakening. Growth in U.S. construction spending has slowed in recent months. And the Architectural Billing Index—a leading indicator—is off its recent highs as well.

He expects up to 30% of the companies he covers to cut full-year 2022 financial guidance.

Mitchell’s cuts follow Thursday cuts from J.P. Morgan analyst Stephen Tusa, who lower targets and estimates for several companies he covers, too.

Tusa didn’t cut his GE earnings estimates. Tusa expects GE see EPS of $2.20 in 2022. That’s already below Mitchell and the consensus EPS estimate of $2.86. Tusa did trim his GE price target by $5, taking it to $50 from $55.

Tusa rates GE stock Hold, but has a Street-low price target for the stock.

Looking ahead, investors can expect more estimate cuts and probably more price target cuts. The bigger deal, however, for GE and its industrial peers will likely be how demand turns out in the second half of 2022. Demand trends will have a lot to say about how the industrial stocks trade in 2023.

Write to Al Root at [email protected]