On Wednesday, Wells Fargo maintained its Overweight rating on General Electric (NYSE:GE) shares, with an increased price target of $200, up from the previous $177. The firm's optimism is based on the potential for General Electric to significantly reduce its selling, general, and administrative (SG&A) expenses in the upcoming years, beyond the company's own projections.
The analyst from Wells Fargo projects that General Electric could cut its SG&A expenses by 300 to 500 basis points, which is two to three times the reduction target of 150 basis points set by the company for 2025. This aggressive cost-cutting could position General Electric near the lower end of its peer group in terms of SG&A to sales ratio, but the analyst believes this goal is achievable without undue difficulty.
Supporting this viewpoint, the analyst cites General Electric Aerospace's high productivity metrics, such as sales per employee and sales per square foot, which are more than double that of its closest competitors. Even after adjusting for these high productivity levels, the analyst suggests that General Electric's costs per square foot and per employee are still two to three times higher than the averages of its peer group, indicating room for significant cost reductions.
The Wells Fargo analyst's revised estimates and price target reflect confidence in General Electric's ability to streamline operations and improve efficiency. The Overweight rating suggests the analyst's belief that the stock will outperform the average return of the stocks that Wells Fargo covers over the next 12 to 18 months.
InvestingPro Insights
As General Electric (GE) continues its journey to optimize operations and enhance profitability, recent data from InvestingPro provides a comprehensive financial snapshot for investors monitoring the company's performance. With a robust market capitalization of $189.74 billion and a Price to Earnings (P/E) ratio of 20.67, GE stands as a significant player in the Industrial Conglomerates industry. The company's stock has shown a strong return over the last year, with a Year-To-Date (YTD) price total return of 35.98%, and an impressive 1-year price total return of 86.38%, indicating a positive trend in investor sentiment.
One of the highlighted InvestingPro Tips suggests that GE's stock generally trades with low price volatility, which may appeal to investors seeking stable investment options. Additionally, GE has maintained dividend payments for 53 consecutive years, reflecting a commitment to shareholder returns despite the anticipated drop in net income for the current year.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available that discuss GE's financial health, including its moderate level of debt and its performance relative to industry peers. To access these insights and refine your investment strategy, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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