GE Aerospace, the newly minted aerospace and defense pure play, continues to coast at a decade-plus high. Is GE stock a buy?
GE Aerospace Launches
On April 2, General Electric split in two — into GE Aerospace and GE Vernova.
GE Aerospace, which makes jet engines and aviation systems, kept the GE stock ticker. GE Vernova houses a gas power and wind energy business.
GE's health care spinoff, GE HealthCare Technologies, debuted in January 2023.
In 2021, an embattled General Electric announced a three-way breakup — into independent, publicly traded companies in aviation, health care and energy.
Before that, the icon of American manufacturing shed a series of assets, from lighting to locomotives.
In November 2017, the company signaled its eventual breakup amid financial troubles.
GE Stock Strikes 15-Year High
The "new GE," GE Aerospace, is far extended from a 132.50 buy point off a three-weeks-tight pattern. That means shares are not within buy range. The stock is up 80% from a November 2023 breakout past a flat-base entry, according to MarketSurge pattern recognition.
The new aerospace stock coasted near a 52-week high May 8, at its best level since April 2008. GE's stock price crashed during the 2008-09 financial crisis.
The relative strength line for GE stock continues to trend higher, but remains below all-time highs. The RS line, the blue line in IBD charts, tracks a stock's progress vs. the S&P 500.
Year to date, the new aerospace stock has soared 67%. It has more than doubled in the past year, up about 111%.
The industrial giant earns an IBD Composite Rating of 96 out of 99, according to the IBD Stock Checkup tool. The rating combines key technical and fundamental metrics in a single score.
General Electric owns an RS Rating of 97, meaning it has outperformed 97% of all stocks in IBD's database over the past year.
IBD Live: A New Tool For Daily Stock Market Analysis
GE Aerospace Earnings
On key earnings and sales metrics, GE stock earns an EPS Rating of 77 out of a best-possible 99, and an SMR Rating of B on a scale of A (best) to E (worst).
The EPS Rating compares a company's earnings per share growth against all other companies. The SMR Rating reflects sales growth, profit margins and return on equity.
GE earnings struggled during the pandemic, weighing on the stock's EPS rating. But profits boomed in 2023 and are expected to remain strong through 2025.
In the first quarter of 2024, GE's earnings skyrocketed 204%, topping forecasts, the company revealed on April 23. Revenue gained 11%.
GE Aerospace reported a 34% increase in total orders during the quarter to $11 billion, with gains across the commercial and defense markets. The aerospace company also raised the midpoint of full-year 2024 profit guidance.
Free cash flow (FCF) at GE Aerospace was $1.7 billion in Q1, more than doubling year over year.
FCF is a closely watched metric. In 2023, total FCF (across all business segments) reached $5.2 billion, up by $2.1 billion from 2022, according to GE's 2023 Annual Report.
Ten analysts on Wall Street raised their price targets on GE stock after the company's latest earnings report, according to FactSet. No one cut.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
GE's 'Crown Jewel'
GE Aerospace — once called GE's "crown jewel" — makes jet engines and aviation systems for plane makers like Boeing, as well as the military. It also runs a lucrative aftermarket business for engine repair and maintenance.
During the pandemic, travel restrictions to halt the spread of Covid-19 negatively affected aircraft deliveries and orders.
Aerospace suppliers also struggled to deliver parts and equipment on time, due to pandemic-fueled shortages of semiconductor chips and plastics. Costs of aluminum and steel also rose.
For GE Aerospace, many of those headwinds have eased.
It is benefiting from the travel rebound after the pandemic, as well as growing defense orders.
Further to that, the Boeing 737 Max crisis is forcing airlines to fly older planes for longer, meaning more demand for GE Aerospace's services business. Boeing's deliveries fell to 26 airplanes in April, less than half of March's total. Its chief executive is set to depart by year-end amid the latest Max issue.
Broadly, airline and aerospace companies are grappling with macroeconomic and geopolitical risks, including wars in the Middle East and Europe.
Rivals to GE Aerospace include Raytheon Technologies and Rolls-Royce in the jet-engine business. GE Aerospace competes with Honeywell in aviation systems.
How To Research Growth Stocks: This IBD Tool Simplifies The Search
Is GE Stock A Buy?
General Electric has completed its huge transformation, from a storied industrial conglomerate to independent aviation, energy and health care pure-play companies.
The new GE Aerospace business continues to grow jet-engine orders.
However, the aviation business is highly cyclical. Risks remain across the global economy. The outbreak of major wars adds to business uncertainty.
For an industrial giant like General Electric, these are challenging headwinds.
From a technical view, GE is far out of range from a follow-on buying opportunity. Shares continue to outperform, following GE Aerospace's public debut on April 2.
Bottom line: GE stock is not a buy right now.
Over the long term, buying an index fund, such as SPDR S&P 500, would have delivered safer, higher returns than buying GE stock. However, shares have outperformed since mid-2022 as General Electric revived growth and began to transform into an aerospace-focused company.
If you want to invest in a large-cap stock, IBD offers several strong ideas here.
To find the best stocks to buy or watch, check out IBD Stock Lists and other IBD content.
