Goldman Prefers Danaher Corp. To GE

Goldman Sachs removed General Electric Co. (GE) from its Conviction Buy list, but remains optimistic on the stock with a “buy” recommendation and US$42 price target that represents upside of roughly 14%.

The firm’s analyst Deane Dray said he made the move because there appears to be a better entry point for shares of industrial tools and technology company Danaher Corp. (DHR).

Over the past 12 months, GE shares have risen 7% versus a 13% gain for the S&P 500, Mr. Dray said in a note to clients.

He remains optimistic about GE’s earnings growth of 10% to 12% in 2007, due to its exposure to European and emerging markets, as well as high-margin services mix.

Mr. Dray also noted that GE could announce the divestiture of its Plastics business, which contributes 4% of the company’s revenue, in the second quarter. Reports suggest the division could be worth US$10-billion to US$12-billion.

GE-DHR 1-yr chart: