April 27 (Bloomberg) -- General Electric Co. shares staged their biggest rally in more than four months after Citigroup Inc. analysts said the company should spin off NBC Universal, GE Money and the real-estate division.

``GE's size and complexity is working against investor interest in the stock and has contributed to further valuation erosion,'' the analysts wrote.

This is the second time this week analysts have suggested GE take such steps. Nicholas Heymann of Prudential Equity Group Inc. in New York said a company such as Google Inc. may be interested in buying NBC Universal as part of its effort to add to its mix of media offerings including YouTube.

Divesting assets would make GE, the world's second-largest company by market value, easier to understand for investors, wrote Citigroup analysts including Jeffrey Sprague, who rates GE a ``buy.'' Such moves could lift the stock to $45, or 26 percent higher than yesterday's closing price, the analysts said.

``It would create some additional value, but not dramatic additional value,'' said Robert Spremulli, an analyst at TIAA- CREF in New York, which owned more than 74 million GE shares at the end of March. ``It's important to note the Citigroup report is talking about spinouts, because if you sell NBC Universal, GE Money, GE Real Estate outright there's very large dilution to earnings per share.''

Under Chief Executive Officer Jeffrey Immelt, who took over for Jack Welch in September 2001, Fairfield, Connecticut-based GE has agreed to more than $80 billion in acquisitions and $35 billion in disposals to shed slower-growing units such as insurance and plastics.

Shares Rise

Shares of General Electric rose $1, or 2.8 percent, to $36.84 at 4:21 p.m. in New York Stock Exchange composite trading, the biggest percentage gain since Dec. 15, 2006. They had lost 5.6 percent in the five years to March 30, lagging behind a 24 percent advance for the Standard & Poor's 500 Index and a 19 percent gain for the Dow Jones Industrial Average.

Google doesn't comment on ``market rumor or speculation,'' spokesman Jon Murchinson said in an e-mail.

By divesting assets that don't fit, the analysts said investors would be more likely to respond to Immelt's effort to tap global growth and keep profit rising at least 10 percent a year by selling equipment and financing for railroads, power plants and airlines.

``Such a move would create a focused infrastructure juggernaut that investors could more easily understand and would likely command a premium,'' the analysts wrote.

Run Them Better

GE will sell divisions if other companies can run them better, Immelt said on a conference call after the company posted an 8 percent increase in first-quarter profit on April 13. He rebuffed suggestions that GE may consider a large spinoff or breakup, citing the company's ability to sell a group of products in emerging economies that have faster growth rates than mature economies such as the U.S.

``I have always been of the mind that if somebody can run a business better than we can, we will sell it,'' Immelt said. ``We did that with insurance, we did that with motors, we are doing it with plastics. But when I look at the portfolio today, there is great strength in the diversity of the business model and best practices that are shared across the board.''

Tyco International Ltd. and American Standard Cos. are among conglomerates that have announced this year plans to dispose of their least profitable divisions and focus on their best performing units. Shares in Tyco, the manufacturing and services company preparing to split into three, have added 7 percent this year. American Standard has increased 23 percent in the period. GE shares have dropped 3.7 percent.

NBC Universal

NBC Universal provided $16.2 billion, or about 10 percent, of GE's $163.4 billion in revenue last year. GE Money had $21.8 billion in sales and GE Real Estate had $5.02 billion in revenue and is one of the company's fastest-growing units.

GE should spin off NBC because the division ``has no meaningful synergy with the rest of the portfolio,'' the Citigroup note said. GE Money, which provides insurance, loans and credit cards, has been a ``true success story'' and ``has now gotten so big that GE cannot let it grow as fast or it will further upset the mix of earnings between finance and non- finance.''

Analysts and investors have long speculated GE might sell NBC Universal or spin it off. Immelt doubled NBC's annual sales by adding assets including Bravo and Vivendi SA's media assets. The division's results have been hurt by the U.S. broadcast network's ratings decline, putting it off the pace of growth Immelt had projected.

Real-Estate Division

The company's real-estate division ``could continue to perform effectively as a standalone entity,'' the analysts, who also included Brian Konigsberg, Kevin McAdam and James Sanders, wrote. A ``leaner'' GE would still have sales of about $125 billion in 2007 and still benefit from being a large and multinational company, Citigroup added.

General Electric may want to wait to see how the media sector develops as an industry before it decides to divest NBC Universal, Spremulli said. Removing GE Money might cause problems for the remaining finance businesses with bondholders if it jeopardizes the AAA credit rating, the highest available, while GE Real Estate is one of the highest-earning divisions at company, Spremulli said.

Frustrated About Shares

At the company's annual meeting April 25, Immelt told shareholders the stagnant share price was ``frustrating.''

The shares may have been overvalued in the late 1990s, Immelt told investors, noting the price-earnings ratio rose to a high of about 50 times earnings, while the shares trade today at 17 to 18 times the next year's estimated per-share profit.

``As bad as it sounds to say, our earnings have grown into the stock price,'' Immelt said. ``Maybe we were too highly valued on the future. We are not today.''

Once earnings rise ``significantly and consistently, then the stock will go up significantly. That's the key long term,'' Spremulli said, adding that to do that, Immelt doesn't necessarily have to do something ``dramatic.''

Exxon Mobil Corp. is the world's biggest company by market value.

To contact the reporters on this story: Rachel Layne in Boston at rlayne@bloomberg.net; Alexis Xydias at axydias@bloomberg.net.

Last Updated: April 27, 2007 16:52 EDT