GE Shares Shine Too Brightly -- Ahead of the Earnings

General Electric (NYSE:GE) may no longer be too big to fail, but its shares might be too rich to keep rallying.

GE's stock has jumped 9% since late last month when the company was stripped of its designation as a "systemically important" financial institution. That rally seems justified, particularly since the maker of aircraft engines, power generators, and medical devices is no longer susceptible to tighter rules and supervision from the Federal Reserve.

And while GE has shed much of its finance business and strategically shifted back to its industrial roots, it is the conglomerate's additional financial flexibility that has investors jazzed.

Upon losing the "SIFI" label, GE has discussed borrowing as much as $20 billion for additional stock buybacks. That has already prompted Moody's Investors Service to warn that GE's credit rating could take a hit. And while more buybacks and dividends could provide a floor for shares, they alone don't necessarily translate into an even higher stock price for GE.

Friday's earnings report will shine a brighter light on GE's core business. Analysts polled by FactSet estimate GE earned 46 cents a share in the second quarter. Revenue is expected to have increased by 8% to $31.8 billion. On a full-year basis, though, earnings are anticipated to be $1.50 a share. By comparison, this consensus forecast was $1.96 two years ago.

In its most recent quarterly report, GE's industrial business's operating profit fell 7% from a year earlier to $3.3 billion. GE chief Jeffrey Immelt has said that industrial orders should pick up in the second half of the year, but that was before Brexit rattled financial markets and potentially disrupted the European economy.

GE, which has rallied more than 20% over the past 12 months and trades at an eight-year high, has finally ascended above the low multiple assigned to financial companies. Fetching 20 times projected earnings over the next 12 months, GE's shares recently have been valued at their highest since late 2004. The multiple is richer than that of rival Honeywell Inc. and the broader S&P 500 industrials sector, but roughly in line with Caterpillar Inc. and Deere & Co.

This energetic rally might be low on power.