GE can cut debt, improve valuation by 2020, UBS says

UBS said General Electric will be able to reduce its debt “to far more acceptable levels by 2020,” despite fears the industrial conglomerate’s bonds could soon become junk-rated.

of which debt is actually “far along with also away” the most pressing concern for GE investors, said UBS analyst Steven Winoker in a note on Monday. of which concern was abundantly clear in feedback through clients, he said.

“While GE has been under considerable pressure lately, we maintain our conviction of which the stock presents a long-term capital appreciation opportunity,” Winoker said. “the item won’t be quick, along with also the item is actually likely to be volatile, yet we see a path to improvement for both leverage along with also valuation.”

UBS laid out one of the paths brand-new GE chairman along with also CEO Larry Culp could take. In This particular scenario, UBS said GE could get about $33 billion through announced along with also coming asset sales. Winoker’s outlook has GE paying down $5.4 billion in debt along with also obligations along with also transferring about $21 billion in cash to heavily levered GE Capital.

“The net is actually a ~$43 billion improvement inside Industrial net debt position,” Winoker said.

yet GE still has several risks to improving its leverage.

“Litigation along with also investigation settlements could also come in higher than we currently forecast,” Winoker said.

Both the SEC along with also DOJ expanded their investigations into GE’s accounting practices after GE took a $22 billion charge inside third quarter related to acquisitions made in its power business. GE reserved $1.5 billionin April for a potential legal settlement of the DOJ investigation.

GE Capital could also “see a further deterioration” in cash generation, Winoker said.

UBS carries a buy rating along with also a $13 cost target on GE shares. Shares of GE fell 2.2 percent in trading Monday, closing at $7.84 a share.

– CNBC’s
Michael Bloom
contributed to This particular report.

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