GE Aerospace has soared 75% in 2024 amid its conversion to a pure-play aerospace company. Meanwhile, many airlines are facing delays from production and quality control issues, which is giving GE Aerospace's aftermarket business a boost. Is GE stock a buy?
GE Aerospace — Stand-alone 'Crown Jewel'
The aerospace and defense pure-play company emerged from General Electric's big breakup, after the industrial conglomerate spun out its energy and health care businesses as GE Vernova and GE HealthCare. GE Aerospace kept the GE ticker.
The conglomerate announced the split in 2021. GE HealthCare began trading as an independent company in January 2023. GE Vernova launched on April 2 this year.
Before the spinouts, General Electric shed a number of assets and operations, from lighting to locomotives. In November 2017, GE began signaling its eventual breakup amid financial troubles.
GE Aerospace was considered the conglomerate's "crown jewel." The unit designs and manufactures jet engines and aviation systems for the likes of Boeing and the military. It also operates an aftermarket business for engine repair, maintenance, and other services.
GE Aerospace's jet-engine rivals include RTX and Rolls-Royce. It also competes with companies such as Honeywell in aviation systems.
GE Aerospace Earnings
In terms of key fundamental metrics, GE stock earns an EPS Rating of 84 out of a best-possible 99. It earns 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 profits boomed in 2023 and are expected to remain strong through 2025 for the stand-alone aerospace company.
In the second quarter of 2024, reported on July 23, GE's earnings skyrocketed 62%, topping forecasts. Revenue gained 4%, also beating forecasts.
GE Aerospace orders rose 18% during the quarter to $11.2 billion, with gains across the commercial and service businesses. Defense orders fell 24.5% for the quarter, but the segment's revenue rose 1.1%. The company also raised the midpoint of full-year 2024 profit guidance.
Free cash flow at GE Aerospace was $1.1 billion in Q2, swelling almost 17% to beat views.
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.
GE Outlook
For fiscal 2024, GE Aerospace expects adjusted earnings to range from $3.95 to $4.20 per share with free cash flow between $5.3 billion and $5.6 billion. The company in April guided earnings between $3.80 and $4.05 per share, with more than $5 billion in free cash flow.
GE also raised its operating profit outlook to range from $6.5 billion to $6.8 billion, from its previous forecast of $6.2 billion to $6.6 billion.
FactSet analysts forecast a 2024 earnings increase to $4.09 per share on $35.76 billion in revenue.
The company expects commercial engines and services revenue to grow in the low-double-digits to mid-teens. GE lifted its operating profit outlook for the business segment to range from $6.3 billion to $6.5 billion, up from the prior guidance of $6.1 billion to $6.4 billion.
Defense and propulsion technologies revenue is seen rising in the mid- to high-single-digits. GE expects its defense operating profit between $1 billion and $1.3 billion.
In early March, GE Aerospace pared its 2025 revenue outlook to low double-digit growth, which is the lower end of its prior range of up to double-digit sales growth in the high teens. The company forecasts an operating profit of about $7.3 billion as the midpoint for the year.
GE Aerospace aims to reach an operating profit of $10 billion in 2028.
As of Sept. 16, FactSet showed 17 research analysts rated GE stock a buy. One has a hold rating and no one had a sell.
Jet Production, Maintenance Demand
The Covid-19 pandemic and its travel restrictions, coming on the heels of the fatal Boeing 737 Max crashes in 2019 and 2020, hammered the aerospace industry. In addition, aerospace suppliers faced logistics constraints and pandemic-fueled shortages for key components, like semiconductor chips and plastics. Material costs for aluminum and steel rose as well.
Many of those headwinds have eased. GE Aerospace is now benefiting from a rebound in air travel, growing defense orders and its simpler status as a stand-alone aerospace play.
Meanwhile, Boeing's production crisis from early 2024 is forcing older plane models to fly longer. That, in turn, is driving demand for GE Aerospace's aftermarket services. However, GE Aerospace's jet-engine business is slashing production of the Leap engine, which powers the troubled Boeing 737 Max plane.
More broadly, airline and aerospace companies are grappling with macroeconomic and geopolitical risks, including wars in the Middle East and Europe.
GE Stock Is A Buy
Shares of GE have rallied more than 75% so far in 2024.
The stock is trading in a buy zone following a Sept. 13 breakout, above a 177.20 buy point for a consolidation.
The current pattern formed next to a prior flat base, which had a buy point at 170.80, according to MarketSurge charts.
GE stock formed the bases above firm support at its 10-week moving average. That gives an additional indicator of strength.
GE Stock Ratings
GE Aerospace leads the 35 stocks in IBD's Defense/Aerospace industry group, according to the IBD Stock Checkup. The aerospace-defense group itself, as of Sept. 16, ranked No. 17 out of the 197 groups tracked by IBD.
GE stock has a 98 Composite Rating out of a best-possible 99. The Composite Rating combines various technical indicators in to one easy-to-read score. GE Aerospace's relative strength line is off its early-May highs, but still earns a 95 RS Rating. The 95 RS Rating indicates that GE stock has outperformed 95% of the stocks in the IBD database over the past year.
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