Bull of the Day: GE Aerospace (GE)

Soaring over +280% in the last year, GE Aerospace GE is a portfolio-worthy stock that investors may be more inclined to pay a premium for after a pullback from an all-time high of $332 a share in early January.

Commercial fleet modernization and active global military aircraft operations have made GE stock a very viable investment, and a further bounce back toward its highs could be in store after impressively exceeding Q4 expectations last month (January 22).

GE's Q4 results were powerful as demand for its jet engines and services surged, while execution improved across factories, with both commercial and defense segments delivering higher output and profitability.

Strong Q4 Results & Earnings Track Record  

Robust orders, strong aftermarket activity, and better material availability all contributed to GE impressively beating Wall Street’s Q4 expectations.

Higher shop visit volumes and expanded aftermarket services boosted revenue, including strong engine maintenance demand for its popular LEAP and CFM56 engines. Beating quarterly sales and EPS expectations by 5% and 9%, respectively, GE’s top and bottom lines stretched more than 18% year over year to $11.86 billion and $1.57 per share.   

Illustrated by the green arrows in the above Price, Consensus, and Surprise chart, GE has now exceeded the Zacks EPS Consensus for 13 consecutive quarters, posting a very impressive average earnings surprise of 14.27% in its last four quarterly reports, as shown below.

GE’s Massive Backlog & Positive EPS Guidance

More compelling is that GE’s total backlog reached roughly $190 billion, up nearly $20 billion year-over-year. This comes as orders during Q4 were up 74% to $27 billion, also reflecting strong customer demand.

Emphasizing operational optimization and margin expansion, GE guided FY26 EPS in a range of $7.10-$7.40, which would reflect 11%-16% growth from adjusted earnings of $6.37 per share last year.

GE’s Compelling EPS Revisions

Curiously compelling, the consensus for GE’s FY26 EPS has risen above its guidance range in the last seven days to estimates of $7.45 compared to $7.15 a week ago.

Supportive of upward movement in GE stock is that FY26 and FY27 EPS estimates have now risen over 6% in the last two months.

Notably, FY27 EPS projections of $8.55 would reflect 200% growth in the last five years, with GE’s annual earnings at $2.81 a share in 2021.

Correlating with the continued outperformance of GE stock, the year-ago estimate picture shows that FY26 and FY27 EPS revisions have now increased over 14%, respectively.

Bottom Line

Upside bias regarding GE Aerospace's profitability remains intact despite its slightly elevated 40X forward earnings multiple.

Reassuring to its operational performance is the aerospace leaders' expectations of revenue acceleration, strong cash flow, and an adequate balance sheet that carries over $12 billion in cash and $130 billion in total assets versus $111 billion in total liabilities.

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This article originally published on Zacks Investment Research (zacks.com).

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