J.P. Morgan Chase warned General Electric shareholders that the industrial conglomerate's deteriorating finances may lead to a lower debt rating.

The firm reiterated its underweight rating on GE shares, saying the major rating agencies are overestimating the company's creditworthiness.

"With fundamentals worse than expected, little progress on asset sales, delays in material revenue recognition restatements, and limited tangible fundamental news from GE since the 4Q print, we remain cautious," analyst Stephen Tusa wrote in a note Tuesday to clients entitled "Whenever the 'Mood' Strikes: Credit Metrics and Fundamentals at Odds With Rating." "We wonder how long the [credit rating] watch dogs can support a currently unjustified rating, in our view, despite material changes in fundamentals."

Moody's has a A2 rating on General Electric's long-term debt, according to FactSet. The credit agency cut its rating on the company to A2 from A1 in November citing "extreme deterioration" in GE's energy business.

The company's shares rose 0.1 percent Tuesday after the report. GE's stock has significantly underperformed the market. The shares have declined 56 percent in the past 12 months through Monday versus the S&P 500's 9.5 percent return.

Tusa reaffirmed his $11 price target for the company, representing 16 percent downside to Monday's close.

The analyst noted how General Electric had an average commercial paper balance of $17 billion in the fourth quarter, which the company reduced to $3 billion at the end of quarter to make the financials look better.

"This level of outstanding commercial paper represents a risk in the event capital markets were to get volatile. The bottom line is that ratings and capital markets availability is important for GE because of this CP dynamic," Tusa wrote.

In another move, Stifel lowered its price target for General Electric shares to $13 from $15 and reiterated its hold rating on the company.

GE has "continued challenges at Power, coupled with the expectation for slower overall growth across long cycle businesses and price/cost material inflation challenges," analyst Robert McCarthy wrote in a note to clients Monday.

General Electric pointed to management's comments during its fourth-quarter earnings call when asked for comment for this story.