General Electric (GE), after completing the big breakup, will become a pure aviation and defense play by early 2024. Is GE stock a good buy after it has broken out to a multi-year high?
The company is on track to spin-off its energy business under the name GE Vernova by early 2024. This will allow GE Aerospace to become a pure aviation and defense business.
General Electric presented positive long-term forecasts at an investor event on March 9. This pushed GE's stock to a 58 month high on March 9.
GE Aerospace benefits from the improvement in commercial aviation.
General Electric spun off their health care business in early January. They now trade as GE HealthCare Technologies. The legendary conglomerate announced that it would be dividing into three parts by the end of 2021.
In Q4, GE's earnings grew 73%. The strength in aviation and power business was offset by the weakness in GE Renewable Energy.
Supply-chain problems and macro uncertainty are a major concern for industrial companies. The rapid inflation rate and the Russia-Ukraine conflict are also headwinds.
On March 31 GE stock broke a 95.04 buying point after a three-week-tight pattern. The shares are now in the zone of buy, which extends to 99.79. On April 18, they reached a new intraday high of 98.52, which is a five-year plus high.
The stock is still above the rising 50-day average and 21-day exponential average.
You might find a better buying opportunity if you pull back to the line of 50 days/10 weeks or move to a new base.
General Electric shares surpassed 84.12 in February. On March 9, the stock rose to 94.94 after management provided a positive outlook for aerospace.
GE's stock has risen by more than 48 percent compared to a gain of about 9% for the S&P 500.
The relative strength line is at its highest point with the stock. A rising RS means that a stock has outperformed the S&P500. The blue line is shown in the graph.
According to the IBD stock checkup tool, the industrial giant has an IBD composite rating of 76 out 99. The rating is a combination of key technical and basic metrics.
General Electric has an RS rating of 97. This means that it has outperformed all other stocks in IBD’s database during the last year.
GE is a very popular stock in Wall Street. As of March 1,816 funds held shares.
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GE's stock has an EPS rating of 47, out of a maximum of 99 possible, and a SMR rating of C on a scale from A (best), to E (worst), based on key sales and earnings metrics. The EPS rating compares a company’s growth in earnings per share to that of all other companies. The SMR rating reflects growth in sales, profit margins, and return on equity.
GE's aviation division was the main contributor to its earnings in the fourth quarter. The onshore wind division continued to drag down earnings.
Wall Street analysts expect GE's earnings per share to drop 24% in 2023 before rising 98% in 2024.
The free cash flow is closely monitored as a measure of the health and performance of GE. FactSet data show that it fell in 2020, rebounded in 2021 and then dropped in 2022.
Fourteen of the 21 Wall Street analysts rate GE as a Buy. Seven analysts have a buy rating, while no one has sold.
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The aerospace division, sometimes referred to as GE's crown jewel, produces jet engines and aviation system for aircraft makers such as Boeing (BA). GE Aerospace has a profitable aftermarket for engine repairs and maintenance.
Travel restrictions imposed to stop the spread of Covid-19 during the pandemic negatively impacted aircraft deliveries and orders.
Due to shortages caused by pandemics, aerospace suppliers have also had difficulty delivering parts and equipment in a timely manner. Aluminum and steel prices also increased.
Many of these headwinds are now lessened for GE Aerospace.
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Raytheon Technologies and Siemens Energy (SIEGY), both of which are competitors to General Electric, also compete.
Raytheon of Britain and Rolls-Royce of Britain compete with each other in the jet engine market. Siemens Energy is a competitor to GE.
3M (MMM), Honeywell HON (HON), and Roper Technologies ROP are other industrial competitors.
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General Electric is poised to undergo a major transformation. It will shed its diverse past and become a company that focuses on aviation.
As rate increases to control inflation weigh down on the global economy, fears of recession are increasing. Business uncertainty is exacerbated by the Russia-Ukraine conflict.
These are difficult headwinds for a cyclical industry giant like General Electric.
Technically, GE is in a buy range, after clearing a follow-on, three-weeks tight entry on March 31, which cleared a previous breakout. This comes after a previous breakout in February, and a huge rally to date.
Bottom line: GE is a good buy.
Over the long-term, an index fund such as SPDR S&P 500 SPY would have provided higher and safer returns than GE. IBD has several good ideas for large-cap stocks.
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Is it a buy? The post GE Stock Hits Fresh Five-Year-Plus High After Soaring In 2023 -- Is It A Buy? appeared first on Investor’s Business Daily.