On Monday, Bernstein SocGen Group adjusted the price target for GE Aerospace (NYSE:GE), increasing it to $225 from the previous $201, while retaining an Outperform rating. The revision comes ahead of the company's third-quarter earnings report scheduled for October 22.
The analyst cited an increased enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) market multiple, which has been adjusted to 15.1 times, up from 14 times. Additionally, the valuation was rolled forward by one quarter, and improvements in the aftermarket were considered.
GE Aerospace is anticipated to address questions regarding the original equipment (OE) production of LEAP engines during its third-quarter report, following a shortfall in deliveries to Airbus in the second quarter due to a shortage of high-pressure turbine blades.
While the blade production recovery may lead to a year-over-year decline in deliveries for the third quarter, this could potentially result in lower revenues but higher margins for GE. The impact of the shortfall may also extend the service life of legacy CFM56-powered airplanes, which benefit from a profitable aftermarket.
The company's shares had previously risen by 6% in the second quarter when the delivery shortfall occurred, suggesting a potential repeat of market response in the third quarter. Another point of interest for the upcoming earnings call is the effect of the Boeing (NYSE:BA) machinist strike on 737MAX deliveries. Although GE has slowed down deliveries of the LEAP-1B engines due to the strike, this may again boost the outlook for CFM56 aftermarket work. Delays in the Boeing 777X certification are also expected to prolong the GE90 aftermarket's profitability.
For the third quarter, Bernstein's revenue estimate for GE Aerospace is $9.21 billion, slightly above the consensus of $9.09 billion. The Adjusted Earnings Per Share (EPS) estimate is aligned with the consensus at $1.10. The firm's projections for revenues and earnings for 2025 and 2026 are above consensus, despite a minor decrease in third-quarter revenue forecasts due to fewer OE deliveries, which has led to a slight increase in the EPS estimate for the quarter.
In other recent news, GE Aerospace reported strong second-quarter results for 2024, surpassing consensus estimates with revenue reaching $8.2 billion. Deutsche Bank increased its price target for GE Aerospace shares from $212 to $235, anticipating the company could surpass earnings per share expectations by 9% to 15% if certain favorable conditions are met. BofA Securities also maintained its Buy rating on GE Aerospace, reiterating a price target of $180, following a discussion of the company's recent financial results.
Furthermore, GE Aerospace was involved in a significant military deal in which Poland finalized a $12 billion agreement with the United States to purchase 96 AH-64E Apache attack helicopters. Siemens Energy, another key player in the industry, agreed to a settlement of $104 million with U.S. authorities over allegations of stolen trade secrets used in gas turbine contract bids.
In Texas, the Public Utility Commission shortlisted 17 gas-fired power plant projects for potential funding from a $5.38 billion government pool. These recent developments highlight the dynamic nature of the aerospace and energy sectors, with major companies like GE Aerospace continuing to make significant strides in their respective fields.
InvestingPro Insights
GE Aerospace's strong market position and recent performance are reflected in the latest data from InvestingPro. The company's market capitalization stands at an impressive $209.19 billion, underscoring its significant presence in the Aerospace & Defense industry. This aligns with the InvestingPro Tip highlighting GE as a "prominent player" in the sector.
The company's financial health appears robust, with revenue for the last twelve months as of Q4 2023 reaching $67.95 billion, representing a solid growth of 16.96% over the same period. This growth trend is further supported by a 15.43% increase in quarterly revenue for Q4 2023, indicating consistent expansion.
GE's profitability is also noteworthy, with a gross profit of $14.83 billion and an EBITDA of $7.877 billion for the last twelve months as of Q4 2023. The EBITDA growth of 78.05% over this period is particularly impressive, suggesting strong operational efficiency and aligning with the InvestingPro Tip that GE has been "profitable over the last twelve months."
Investors should note that GE's stock has shown remarkable performance, with a one-year price total return of 120.36% as of the latest data. This exceptional return supports the InvestingPro Tip indicating a "high return over the last year" and "trading near 52-week high."
For those interested in a deeper analysis, InvestingPro offers 10 additional tips for GE, providing a comprehensive view of the company's financial health and market position.
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