GE Stock Triggers Buy Signal After Strong Aerospace Outlook — Is It A Buy?| Investor’s Business Daily

General Electric (GE) eyes a future as an aviation and defense pure play, shedding its diversified conglomerate past. Is GE stock a buy after strong aerospace-driven earnings and outlook?

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GE News

On Oct. 24, the industrial giant delivered another quarterly beat-and-raise report, with gains or further improvements across its aerospace, gas power and renewable energy segments.

The company said the planned spinoff of its power and reneweables business, as GE Vernova, next year remains on track. That will allow the “new GE,” GE Aerospace, to emerge as a stand-alone company.

GE’s health care spinoff, GE HealthCare Technologies (GEHC), debuted on the Nasdaq in January. General Electric had announced a three-way breakup — into independent energy, health care and aviation companies — in 2021. Prior to that, it shed a series of assets, from lighting to locomotives.

Industrial companies are grappling with supply-chain issues and macro uncertainties. Other headwinds include the rapid rise in inflation and the Russia-Ukraine war.

GE Stock’s Huge Rally

On Nov. 10, shares of General Electric cleared a trendline entry, moving past the Oct. 24 intraday high of 114.89. Gains in four of the past five sessions have hoisted GE shares above the 50-day / 10-week moving averages.

GE stock shows an official 117.96 flat-base buy point, according to MarketSmith. It sits 2% below that entry. The relative strength line for GE stock is hitting highs on the weekly chart, though it’s still below the consolidation peak. 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 soared more than 76%, reaching a five-year-plus high. It has rebounded in November with stocks at large from a pullback in the prior two months.

The industrial giant earns an IBD Composite Rating of 93 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 76 out of a best-possible 99, and an SMR Rating of C, 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 2022, GE earnings surged 53% as revenue grew 3%, according to the company’s 2022 Annual Report. On Oct. 24, GE beat estimates for the third quarter and raised financial targets, driven by strength in its aerospace business.

In Q3, GE’s renewable energy unit also cut losses and gas power saw profits soar.

Free cash flow (FCF) is a closely watched metric. In 2023, GE management now expects FCF to reach as much as $5.1 billion, up from its previous view for $4.6 billion.

Out of 18 analysts on Wall Street, 11 rate GE stock a buy. Seven have a hold and no one has a sell. Six analysts hiked price targets on GE shares after the Q3 earnings report, FactSet shows. One cut.

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GE Aerospace

The aerospace segment — sometimes called GE’s “crown jewel” — makes jet engines and aviation systems for plane makers including Boeing (BA). 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.

The aerospace segment continues to benefit from a recovery in commercial air travel, as well as growing defense orders.

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Rivals To General Electric

Rivals to General Electric include Raytheon Technologies (RTX), Siemens (SIEGY) and Honeywell (HON).

Raytheon and Rolls-Royce of Britain are major jet-engine rivals. GE competes with Siemens Energy in power and with Honeywell in aviation systems.

Other industrial peers include 3M (MMM) and Roper Technologies (ROP).

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Is GE Stock A Buy?

General Electric’s poised for a huge transformation, shedding its diversified past to make a big bet on an aviation-focused future.

However, the jet-engine business is highly cyclical. Globally, recession fears linger, while rate hikes to control inflation are weighing on many economies. The Russia-Ukraine war, and now the Middle East war, add to business uncertainty.

For an industrial giant like General Electric, these are challenging headwinds.

From a technical view, GE shares continue to act well, outperforming as the broad market rallies.

This top industrial stock has topped a trendline entry, though still below a traditional buy point. It has ripped higher in 2023 ahead of the GE Aerospace debut, with the move backed by a strong RS line.

Bottom line: GE stock is a buy.

Over the long term, buying an index fund, such as SPDR S&P 500 (SPY), would have delivered safer, higher returns than GE stock. 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.

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