General Electric emerges today as an aerospace and defense pureplay, shedding its diversified conglomerate past. Is GE stock a buy as it now represents the GE Aerospace unit, and what of GE's Vernova energy unit, which trades under the GEV ticker?
GE Aerospace Launch
Ahead of its final breakup, GE held events in March that dug deeper into the post-split companies — GE Aerospace and GE Vernova.
As the "new GE," GE Aerospace, emerges as a stand-alone company it will continue to use the GE stock ticker and remain on the S&P 500 index.
Vernova, home to the gas power and wind energy business, technically launched on Thursday, but remained inactive until shares were actually issued. It trades under the ticker symbol GEV and will join the S&P 500.
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 aviation, health care and energy companies.
Before that, the icon of American manufacturing shed a series of assets, from lighting to locomotives.
GE Stock At Multi-Year High
The new GE Aerospace, formerly General Electric stock, are 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 50% from an earlier, November breakout past a flat-base entry, according to MarketSurge pattern recognition.
The new aerospace stock sits at its highest level since June 2017, shortly before the company signaled a breakup amid financial troubles.
The relative strength line for GE stock continues to trend higher. The RS line, the blue line in IBD charts, tracks a stock's progress vs. the S&P 500.
Year to date, GE stock has risen 38%. It has soared more than 89% in the past year.
The industrial giant earns an IBD Composite Rating of 95 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 95, meaning it has outperformed 95% of all stocks in IBD's database over the past year.
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GE Earnings
On key earnings and sales metrics, GE stock earns an EPS Rating of 74 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 to all other companies. The SMR Rating reflects sales growth, profit margins and return on equity.
In 2023, GE earnings surged 264% as revenue grew 17%, capped off by a solid fourth quarter, according to the company's 2023 Annual Report. Its aerospace business drove results while renewable energy and power both improved performance.
While Q4 earnings beat, the company's 2024 guidance fell short of expectations.
Free cash flow (FCF) is a closely watched metric. In 2022, General Electric's FCF reached $5.2 billion, up by $2.1 billion.
Out of 19 analysts on Wall Street, 13 rate GE stock a buy, FactSet shows. Six have a hold and no one has a sell.
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GE's 'Crown Jewel'
The aerospace segment — sometimes called GE's "crown jewel" — makes jet engines and aviation systems for plane makers including Boeing, as well as the military. GE Aerospace 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 recovery in commercial air travel 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 orders fell in January and February and 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.
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Is GE Stock A Buy?
The division into GE Aerospace and GE Vernova completes the blue chip's a huge transformation, from a storied industrial conglomerate to aviation and energy pure-play companies. The upcoming GE Aerospace 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 out of range from a follow-on buying opportunity. Shares continue to outperform, ahead of 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.
Alan Elliott contributed to this article.
