Stock of the Day

December 3, 2020

GE Aerospace (GE)

$256.24
+$4.32 (+1.7%)
Market Cap: $272.97B

About GE Aerospace

GE Aerospace (also known as General Electric) is a company that specializes in providing aerospace products and services. It operates through two reportable segments: Commercial Engines and Services and Defense and Propulsion Technologies. It offers jet and turboprop engines, as well as integrated systems for commercial, military, business, and general aviation aircraft. GE demerged into GE Vernova, GE Aerospace, and GE Healthcare.

GE Aerospace Bull Case

Here are some ways that investors could benefit from investing in General Electric:

  • The current stock price is around $250, reflecting strong market interest and potential for growth.
  • General Electric reported earnings per share of $1.49 for the latest quarter, exceeding analysts' expectations, indicating robust financial performance.
  • The company has a high return on equity of 22.19%, suggesting effective management and profitability relative to shareholder equity.
  • Analysts have a consensus rating of "Moderate Buy" for General Electric, with multiple firms issuing buy ratings and raising price targets, indicating positive market sentiment.
  • General Electric's revenue for the latest quarter was $9.94 billion, significantly above estimates, showcasing strong demand for its aerospace products and services.

GE Aerospace Bear Case

Investors should be bearish about investing in General Electric for these reasons:

  • Insider selling has been observed, with key executives reducing their holdings, which may signal a lack of confidence in the company's future performance.
  • The stock has a relatively high price-to-earnings (P/E) ratio of 41.90, which could indicate that it is overvalued compared to its earnings, posing a risk for investors.
  • General Electric's debt-to-equity ratio stands at 0.88, suggesting a significant level of debt that could impact financial stability and flexibility.
  • Some analysts have downgraded their ratings, indicating mixed opinions on the stock's future performance, which could lead to volatility.
  • The company operates in a highly competitive aerospace market, which may affect its ability to maintain margins and market share in the long term.

General Electric (NYSE:GE) Stock a Buy: An Overlooked Pandemic Play

Written By Sean Sechler on 11/25/2020

General Electric (NYSE:GE) Stock a Buy: An Overlooked Pandemic Play

For decades, General Electric (NYSE:GE) was one of the most respected and renowned industrial companies in the United States. The stock was one of the most reliable performers in the market and consistently rewarded investors with dividend increases over the years. However, the company experienced a major rough patch beginning during the financial crisis of 2008 that eventually resulted in slashed dividends, several CEO changes, and the stock getting dropped from the Dow Jones Industrial Average. While many investors still perceive General Electric as a company in transition with a long way to go, the stock has quietly been one of the best performers in the market lately. It’s up over 38% in November and could be in for more upside over the next few months.

There are several reasons to consider adding shares of General Electric stock at this time, even after its latest rally. Let’s take a deeper look below at why it might be a good option for value investors.

Helping Doctors Treat Critically Ill COVID-19 Patients

When you think of companies that are helping in the fight against COVID-19, General Electric might not be the first name that comes to mind. However, the beauty of a company like General Electric is that it is well-diversified and generates revenue from several operating segments including aviation, power, renewable energy, capital, and healthcare. The company is receiving a surge in orders for COVID-19-related healthcare products, which should continue well into next year. GE has increased its global manufacturing capacity for critical medical equipment such as respiratory, x-ray, monitoring solutions, anesthesia, and point of care equipment that are helping doctors around the world manage the health crisis.

General Electric also recently made an exciting announcement about new healthcare technology that might end up saving lives as doctors deal with COVID-19 patients in critical condition. On November 23rd, GE Healthcare announced a new artificial intelligence (AI) algorithm that helps clinicians assess Endotracheal Tube placements. The algorithm assists doctors with making potentially life-saving adjustments and correctly assessing when a patient needs to be placed on a ventilator. Chest x-rays need to be evaluated as soon as possible, and GE Healthcare’s Critical Care Suite 2.0 is an industry-first technological advancement that can help to make that happen more quickly.

Post-Vaccine Positives

Another reason why General Electric stock might be worth a look at this time has to do with what their Aviation operating segment could look like in a post-vaccine world. Since General Electric made of 35% of its 2019 revenue from Aviation, it makes sense that its earnings have taken a big hit thanks to the pandemic. The company is a global provider of jet engines and their related components and services in commercial and military aviation markets. With COVID-19 significantly affecting the commercial airline industry, Aviation revenues dropped 39% year-over-year in Q3 for the company to $4.9 billion.

If you believe that the commercial airline industry will rebound quickly after a vaccine has been approved by the FDA, companies like General Electric could see a significant earnings boost as people start traveling again. It’s also worth noting that GE’s LEAP aircraft engine line could have better days ahead, as it is the exclusive engine for the Boeing 737 Max that was previously grounded indefinitely. The 737 Max should be flying again soon after the Federal Aviation Administration recently cleared it to fly passengers, which is even more good news for General Electric shareholders.

Turnaround Time?

While General Electric is certainly seeing sharp earnings declines this year as a result of the pandemic, there are reasons for optimism that value investors should keep in mind. Thanks to the progress that the latest management team has made in turning the company around, the stock seems to have finally found a bottom. With margins in the non-aviation business segments seeing strong improvements in Q3, it appears the CEO Larry Culp has the company headed in the right direction. GE also could see strong improvements in Free Cash Flow as more operational efficiencies are achieved.

The bottom line here is that General Electric is an overlooked pandemic play that could end up being a staple of your portfolio. While there are always risks associated with buying a company that is vulnerable to cyclical demand and high leverage, the good headlines are starting to outweigh the bad ones for this iconic American company.

 

 

 

 

 

 

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