Should You Pick GE Stock Ahead of Q3?

GE Aerospace (NYSE: GE) is scheduled to report its Q3 2024 results on Tuesday, October 22. We expect the company to post mixed results, with revenue of $9.1 billion and earnings of $1.10 per share, compared to the consensus estimates of $9.0 billion and $1.14, respectively. The company is expected to benefit from continued demand for aftermarket service. With Boeing’s operations disrupted recently due to the union strike, it may have some impact on GE’s performance in the next quarter and investors will be looking to hear more on it in the earnings call. GE has seen its profitability improve lately, a trend likely to continue in Q3 as well. Our interactive dashboard analysis of GE Aerospace’s FY 2024Q3 Earnings Preview has more details on how the company’s revenues and earnings will likely trend for the quarter. 

What Trends Will Drive GE Aerospace’s Q3 Results?

GE should benefit from a high demand for engine services and spare parts. Much of the growth for the company is expected to come from the aftermarket business, while its equipment sales growth may remain tepid. The company’s operating margin is expected to improve in Q3, driven by better price realization and product mix.

How Did GE Aerospace Fare In The Previous Quarter?

General Electric’s revenue of $9.1 billion (GAAP) was up 4% y-o-y, driven by higher order flows. The company’s total orders of $11.2 billion were up 18% y-o-y. The company saw its adjusted profit margin expand 560 bps y-o-y to 23.1% in Q2, vs. 17.5% in the year-ago period. Higher revenues and margin expansion resulted in solid earnings of $1.20 on a per-share and adjusted basis, reflecting a significant 62% rise from the $0.74 figure in the prior year period. Looking forward, the company expects its sales to rise in the high single-digits in 2024, and it expects adjusted earnings per share to be in the range of $3.95 and $4.20. Overall, GE posted a solid Q2 and a strong demand outlook clubbed with improving margins should bode well for the company.

Is GE Stock Undervalued?

GE stock has had a stellar run this year, with 90% gains vis-à-vis 22% rise for the broader S&P 500 index. GE has undergone a significant restructuring. It had split its healthcare business last year and separated its renewable energy and power business earlier this year. After spinning off its other businesses, GE Aerospace is expected to see robust earnings growth in coming years and a healthy balance sheet. This has driven its stock price this year. We estimate General Electric’s Valuation to be $190 per share, close to its current market price.

The increase in GE stock over the last three-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile, and it has outperformed the S&P 500 each year over the same 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.

While GE stock looks like it is appropriately priced, 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.

[1] Returns as of 10/21/2024
[2] Cumulative total returns since the end of 2016

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