GE Aerospace (NYSE: GE) recently reported its Q4 results, with revenues and earnings well ahead of the street estimates. The company reported revenue of $9.9 billion and adjusted earnings of $1.32 per share, compared to the consensus estimates of $9.5 billion and $1.04, respectively. GE’s Q4 was driven by better price realization.
GE stock, with 94% returns since the beginning of 2024, has significantly outperformed the S&P 500 index, up 28%. GE has gone through a significant restructuring, separating its healthcare and energy businesses into separate listed entities, and this has resulted in increased investor optimism for GE stock, which focuses on aviation technology. If you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
How Did GE Fare In Q4?
GE Aerospace’s revenue of $9.9 billion was up 16% y-o-y. Looking at segments, commercial engines and services saw a 19% y-o-y growth to $7.65 billion and defense and propulsion technologies sales were up 4% to $2.52 billion. GE also saw a 450 bps y-o-y improvement in adjusted operating margin to 20.1% in Q4. Higher revenues and margin expansion resulted in the bottom line of $1.32, reflecting a 103% y-o-y rise.
GE’s aftermarket business has been faring well, a trend expected to continue going forward. The company’s total orders also surged 46% y-o-y to $15.5 billion during the quarter. GE also provided an upbeat outlook, with revenue expected to grow in low double-digits in 2025, versus $35.1 billion in 2024. It expects adjusted earnings to be in the range of $5.10 and $5.45 per share, versus $4.60 last year. GE now plans to spend $7 billion in share repurchases this year, and it also hiked its dividend by 30% (pending board approval).
What Does This Mean For GE Stock?
GE stock surged 9% after its Q4 results announcement. Looking at a slightly longer period, the increase in GE stock over the last four-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 10% in 2021, -11% in 2022, 94% in 2023, and 65% in 2024.
The Trefis High Quality Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could GE face a similar situation as it did in 2021 and underperform the S&P over the next 12 months — or will it see a strong jump? While we will soon update our model for GE to reflect the latest results, after its recent rise, GE stock looks like it has little room for growth. At its current levels of $197, GE stock trades at 43x trailing earnings, slightly lower than the stock’s average P/E ratio of around 47x over the last three years.
While GE stock looks like it has little room for growth, it is helpful to see how GE Aerospace’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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