January 21, 2009 / 4:56 PM / 9 years ago

UPDATE 3-Analysts see risk to GE credit rating, fear div cuts

(Updates stock movement)

Jan 21 (Reuters) - Analysts fear blue chip General Electric Co’s (GE.N) credit rating may be at risk and that the diversified manufacturer may have to cut its dividend, as a pall of gloom gathers over economies across the globe.

GE shares fell to $12.24, their lowest in more than 10 years, before recovering some of their losses to trade down 3 percent at $12.45 in morning trade on the New York Stock Exchange.

UBS placed a “short-term sell” rating on the stock and removed it from the strategic stock selection list, saying the company might have to raise additional capital.

Goldman Sachs said GE shares were already discounting substantial bad news with its options pricing implying a 50 percent dividend cut in 2010.

“We think industrial cash flow can sustain the dividend in 2009, but acknowledge that an infrastructure rollover in 2010 beyond our forecast could place the dividend and “AAA” rating at risk,” Goldman said in a note to clients.

GE officials have repeatedly said that keeping the “AAA” rating, which allows the company to borrow money more cheaply, is a top priority.

Goldman Sachs also cut its price target on the stock by $2 to $15, and lowered its profit forecast for the company through 2010 on concerns of higher losses at its GE Capital arm.

GE Capital was created last July, when the company merged its commercial and consumer finance arms to focus on three regional centers in Europe, Asia and the Americas.

Its performance has dragged down the U.S. conglomerate’s results in recent quarters because of the global credit crunch.

Goldman lowered its fourth-quarter 2008 estimates for the company to 36 cents a share from 45 cents a share. The brokerage cut its 2009 profit forecast for GE by 5 cents to $1.35 a share.

It also pegged the company’s 2010 earnings at $1.30 a share, down from its prior estimate of $1.40 a share.

The brokerage, however, maintained its “neutral” rating on the stock.

Shares of the company have been battered over the past year, falling 62 percent, compared with a 46 percent decline of the Standard & Poor’s capital-goods industry index .GSPIC.

The company is scheduled to report fourth-quarter results on Friday. (Reporting by Dhanya Ann Thoppil in Bangalore; Editing by Amitha Rajan and Saumyadeb Chakrabarty)

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