General Electric: 5 Reasons to Buy, Says Bernstein

General Electric (GE) shares have dipped since Bernstein Research analyst Steven Winoker downgraded them in January, even though the biggest threat — an expensive industrial acquisition — never materialized. Now Winoker sees plenty of upside for the stock, and thinks shares could climb to $21 from $16.37 at yesterday’s close.

Winoker sees five potential catalysts:

1. More dividend raises, pushing the yield above 4%.
2. The resumption of a dividend paid by GE Capital to the larger corporation upon Fed approval.
3. free cash flow growing 10% per year to more than $11 or $12 billion, offsetting pension costs.
4. Rising gas turbine orders anticipated in mid-2012 helping pricing and margins in energy.
5. good upside/downside valuation. “To the downside, we assume our severe recessionary scenario EPS which is ~25% below our base case, as well as multiple contraction and that would result in ~$13-14 per share. On the current stock price of $16, this suggests ~2:1 upside/downside.

GE shares rose 2.9% to $16.80 in afternoon trading.