The GE Aerospace stock price recovered modestly this year ahead of the upcoming fourth-quarter earnings. It rose to a high of $182.85, its highest swing since November last year. It has risen by almost 15% from its lowest point in December. So, is GE a good stock to buy?
GE Aerospace stock price is rebounding
GE has become one of the best-performing industrial companies in the United States. Its stock has jumped from $26.85 in 2020 to $185 today.
This recovery happened as the company went through the biggest change in its history. It did that by separating its business into three separate and publicly traded companies: GE Aerospace, GE Vernova, and GE Healthcare.
GE Aerospace, the remainco, is the world’s biggest manufacturer of aircraft engines for civil aviation and defense industres. Its engines power aircrafts like the Boeing 787, 777, and Airbus A 380, among others.
GE Aerospace’s business is doing well as demand for narrow and wide-body engines remains significantly high.
The company’s most recent financial results showed that its order growth rose by 28% in the third quarter, while its revenue jumped by 6%. In the third quarter, it delivered 595 engines, up from 489 in the same period a year earlier.
GE Aerospace’s orders rose to $12.8 billion. Its commmercial engines and services revenue rose by 8% to $7 billion, while its operating profit moved to $1.8 billion. The defense segment’s revenue rose to $2.2 billion.
Read more: GE Aerospace CEO: we are ‘tremendously’ well positioned as a standalone business
GE Earnings ahead
The next important catalyst for the GE Aerospace stock price will be its earning scheduled on Tuesday. According to Yahoo Finance, analysts anticipate that its fourth-quarter revenue will be $9.49 billion, which will bring its full-year revenue at about $32 billion. Analysts anticipate the numbers to show that its revenue will be $35 billion.
The company’s guidance was that its operating profit would be between $6.7 billion and $6.9 billion, while its adjusted EPS will be between $4.20 and $4.35. Most importantly, the company’s free cash flow is expected to keep rising, with the full-year figure between $5.6 billion.
The soaring FCF has helped the company to continue returning funds to investors. It spent $1.3 billion in share buybacks in Q3, bringing the total repurchases by Q3 to $3.7 billion. Following the spin off, the management hopes to repurchase stock worth about $15 billion.
The main concern about GE Aerospace is that its market cap of over $197 billion suggests that it is highly overvalued. This means that its forward price-to-earnings (PE) ratio stands at 38, higher than the sector median of 23.
Wall Street analysts justify this valuation to the company’s valuation, citing its order book growth, market share in the civil and defense aviation industry, and its free cash flow. As such, analysts anticipate that the stock will jump to $208 from the current $182.
GE Aerospace stock price
The weekly chart shows that the GE share price surged from $26.38 in 2020 to almost $200 today. It has remained above the 50-week Exponential Moving Average.
However, the stock has also formed a rising broadening wedge pattern, a popular bearish sign. This pattern has two ascending and broadening trendlines and often leads to a breakdown.
Therefore, there are rising odds that the stock will have a bearish reversal in the coming weeks. If it happens, the next point to watch will be at $150, down by about 18% from the current level.
The alternative scenario is where it rallies and retests the upper side of the wedge at about $200 before starting to more downwards.
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