Shares of General Electric Co. rose Friday to a nine-month high, after BofA Securities analyst lifted his stock price target by 18%, amid a more upbeat outlook on the industrial conglomerate’s health care business as COVID-19 cases rise globally.
The stock GE, +2.64% reversed an earlier intraday loss of a much as 0.8% to run up 2.6% to $10.88. That’s the highest closing price since March 4.
GE’s stock has now run up 69.5% over the past three months, enough to make it the SPDR Industrial Select Sector exchange-traded fund’s XLI, +1.19% best performer over that time period, and the S&P 500 index’s SPX, +0.88% second-best performer. In comparison, the industrial ETF has advanced 14.6% the past three months and the S&P 500 has tacked on 7.9%.
BofA’s Obin reiterated the buy rating he’s had on GE since January 29, and raised his price target to $13 from $11. The new target implies a 19.5% gain from current levels. The stock last closed above $13 on Feb. 12, which was about a month before the World Health Organization declared the COVID-19 outbreak a pandemic.
Obin’s more bullish view follows a presentation on Thursday by Kieran Murphy, who is chief executive officer of GE Healthcare. Murphy said he believed Healthcare will “close out a strong year here,” given COVID-related demand from ventilators and monitors, and as pharmaceutical diagnostics volumes returned in the fourth quarter.
“I would say, look, overall, we’re seeing a return to somewhat more stable markets, higher scan rates,” Murphy said, according to a transcript provided by GE. “Hospitals, don’t forget, are getting more and more resilient in terms of the way they’re setting up capacity to eat into the pent-up demand in oncology and cardiology, for example.”
That led Obin to raise his overall 2020 earnings estimate for GE by a penny per share to 3 cents, and his 2021 EPS estimate to 35 cents from 34 cents.
“The recovery in pharmaceutical diagnostics (PDx) and ultrasound is continuing,” Obin wrote in a note to clients. “The outlook is also supported by backlog growth…and stable trends in scans/machines.”
The fact that GE Healthcare has noted some benefit from the COVID-19 pandemic may broaden the appeal for investors. The stock had been rallying ahead of GE’s third-quarter report in late October, as some analysts touted the company as being highly-levered to a COVID-19 vaccine, given its exposure to the aerospace sector.
As Obin noted, COVID-19 has also accelerated the adoption of Edison, which is GE’s health care software platform.