General Electric shares will thrive under the leadership of its new CEO, according to RBC Capital Markets.
The firm raised its rating to outperform from sector perform for GE shares, citing the successful track record of its newly installed chief executive.
On Monday, General Electric shares rose 7.1 percent after the company announced its board removed John Flannery as chairman and CEO and installed former Danaher CEO Lawrence Culp as his successor. The company also said it will "fall short" of its previous 2018 earnings per share and free cash flow financial guidance.
"Investor confidence in Larry Culp's strategic vision and operating excellence should put a floor in the stock," analyst Deane Dray said in a note to clients Monday. "To be clear, there is still much to fix at GE, but the market can now have full confidence in the senior leader at the helm."
Dray increased his price target to $15 from $13 for GE shares, representing 24 percent upside to Monday's close.
GE shares closed up 1.9 percent Tuesday.
The analyst said Danaher's sales and market value rose about five times under Culp's 14-year tenure as CEO starting in 2000. He also noted the the company's stock performance under his leadership quintupled the performance of the S&P 500.
"We have known Mr. Culp for 15+ years and have deep respect for his leadership and relentless focus on operating excellence and accountability," Dray said.
GE shares have significantly underperformed the market over the previous year. The stock declined 51 percent in the past 12 months through Monday versus the S&P 500's 16 percent return.
On Tuesday, the company announced it has agreed to sell its intelligent platforms [machine control automation solutions] division to Emerson. Terms of the deal were not disclosed.