GE Aerospace has recently reported its Q2 results, with revenues falling short of expectations but earnings surpassing street estimates. The company reported adjusted revenue of $8.2 billion and adjusted earnings of $1.20 per share, compared to consensus estimates of $8.4 billion and $0.98, respectively. Despite this, GE stock has surged 6% in a week following the Q2 beat, now up a remarkable 70% this year. Analysts believe there is still more room for growth in GE stock, considering its performance, key takeaways from recent results, and valuation.
Although GE stock has seen significant gains, rising 3x from $55 in early January 2021 to around $170, it has not been consistent. Returns for the stock were 10% in 2021, -11% in 2022, and 96% in 2023, compared to 27%, -19%, and 24% for the S&P 500 over the same periods. It has been challenging for individual stocks to consistently outperform the S&P 500 in recent years, even for heavyweights in the industry. However, the Trefis High Quality Portfolio has outperformed the index each year over the same period, showcasing better returns with less risk.
In light of the current uncertain macroeconomic environment with high oil prices and elevated interest rates, questions arise about GE’s potential performance over the next year. From a valuation perspective, GE stock seems to have more room for growth, with an estimated valuation of $190 per share, implying over 10% upside from current levels. The company’s Q2 revenue of $9.1 billion was up 4% year-over-year, driven by higher order flows. Total orders also increased by 18% year-over-year, leading to an expanded adjusted profit margin of 23.1% in Q2.
Looking ahead, GE expects its sales to rise in the high-single-digits in 2024, with adjusted earnings per share projected to be between $3.95 and $4.20. The company’s strong demand outlook and improving margins indicate positive prospects for future growth. GE Aerospace has undergone significant restructuring by splitting its healthcare business last year and separating its renewable energy and power business earlier this year. With a focus on its aerospace business, GE can anticipate robust earnings growth and a healthy balance sheet in the coming years.
Despite the potential for GE stock to reach higher levels, it is beneficial to assess how GE Aerospace’s peers are performing on key metrics. Understanding how the company compares to others in the industry can provide valuable insights for investors. Overall, GE’s strong Q2 results, positive demand outlook, and improving margins position the company well for future growth in the aerospace sector. Analysing peer comparisons can help investors make informed decisions when considering investing in GE stock or other companies in the industry.
