GE Aerospace Soars High Analysts Raising The Bar

Shares of GE Aerospace (NYSE: GE) lost a little ground on Wednesday, down 2.11% as the buzz surrounding the industrial leaders positive first-quarter earnings took a breath. After adding 8% in Tuesday's session and pushing the 52 week highs to new levels, a pause for thoughts can be a healthy sign. Four analysts raise price targets through the day, highlighting the growing confidence in the firm.

Showcasing robust financial heath amid its continued restructuring, the company delivered revenue of $16.1 billion along with earnings per share (EPS) of 82 cents – marking a sharp 17.55% surprise.

This quarter's financial disclosure is notably the last that captures General Electric as a conglomerate, including contributions from the now spun-off GE Vernova Inc. (NYSE: GEV), its energy unit. Looking ahead, GE's earnings will be compartmentalised into two focused segments within GE Aerospace: Commercial Engines & Services (CES) and Defense & Propulsion Technologies (DPT).

GE Aerospace, the company's aviation arm, propelled the impressive results with an adjusted revenue of $8.1 billion, which signifies a 15% increase compared to the same period last year. Not only did the division's revenue grow, but also its efficiency, with an operating profit margin that expanded to an impressive 19.1%. Moreover, GE Aerospace also generated a substantial $1.7 billion in free cash flow.

Orders within the aerospace segment soared to $11 billion for the quarter, illustrating a robust increase of 34% year-over-year. This burgeoning demand signals a rejuvenated aviation sector post-pandemic and underpins the unit's future growth prospects.

Confidence in GE Aerospace's momentum is further underscored by its upwardly revised guidance for 2024. The company now projects its operating profit to land in the range of $6.2 billion to $6.6 billion with projected EPS bracketed between $3.80 and $4.05.

Analysts reacted positively with BofA, Deutsche Bank, RBC Capital, and Argus all raising price targets yesterday. With new target marks from the four firms of $180, $190, $175, and $180, the current GE price a shade under $160 leaves some room for further ascent.

Investors not only have these numbers to cheer about, but also the comprehensive capital allocation framework that GE plans to roll out. Aiming for an ambitious $10 billion operating profit by 2028, the framework outlines a substantial return of capital to shareholders, encompassing $15 billion in share buybacks and a generous dividend hike of 250%.

Over the last 6 months leading into the earnings release, GE stock had already witnessed an ascent of almost 80%, with market analysts remarking that the stock's high valuation reflected investor expectations for an almost flawless performance. Despite trading down on the release, the stock remains very firmly in an upward channel, hitting 52 week highs as recently as Tuesday. Expectations were clearly high, and broadly speaking GE delivered.

General Electric's transition to a more streamlined and focused entity appears to be well-received by the market. As GE Aerospace sets its bearings on clear skies ahead, investors are likely to keep a close eye on the company's trajectory, anticipating continued financial outperformance and shareholder value creation.