GE's New Pitchman Sounds Like Immelt: Tara Lachapelle

As Mondays go, this one must be a tad frustrating for Jeff Immelt.

The General Electric chief executive is months into an overhaul of the more than century-old conglomerate, shedding most of GE’s finance arm to focus on its sweet spot: industrial products such as jet engines, locomotives and gas turbines. And while that’s helped the stock perform better than some of its peers, through Friday the price hadn’t gotten that much of a boost since Immelt unveiled the plan in April.

Now here comes Nelson Peltz, with a $2.5 billion stake and a chart-filled white paper, titled "Transformation Underway... But Nobody Cares."

Ouch, but he’s right. Peltz’s activist firm Trian Fund Management says it mostly agrees with Immelt’s strategy, and boom, the endorsement gives the stock a 4 percent pop. Suddenly, people care. It’s the activist effect.

On the one hand, Trian’s involvement is good for other GE shareholders. It ensures that Immelt & Co. do what they say they’re going to do and possibly more. Trian did give some of its own recommendations and goals for the company, such as reaching $2.20 of earnings per share in 2018. But even Trian points out that Immelt has kind of said the same thing already (see slide 69).

The market reaction shows how much weight is placed on activists’ comments, which sometimes aren’t anything novel. Peltz isn’t trying to undermine Immelt’s plans, as much he’s simply endorsing them. Call it a buy recommendation.

If GE’s share price does achieve Trian’s $40 to $45 target by the end of 2017, does Peltz get to take the credit for helping it get there? Or does it simply mean he’s a good stock picker?

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