Another week, another analyst upgrade for GE Aerospace(NYSE: GE), with Deutsche Bank nudging the price target for the stock up from $210 to $212 and maintaining a buy rating. The target implies a 12.7% jump in the stock price over the next 12 months.
Wall Street is in love with GE Aerospace
This upgrade comes a couple of weeks after Bernstein initiated coverage with a $201 price target and an outperform rating on the stock. Given the difficulties at other large-cap aerospace-focused stocks like Boeing and RTX, it's not surprising that GE Aerospace is now favored among the analyst community.
Boeing continues to struggle with a plethora of issues, not least of which is ramping up airplane deliveries, and RTX's Pratt & Whitney division is still removing engines for inspection, lowering cash-flow expectations on legal matters, and terminating fixed-price development projects in defense. GE Aerospace, meanwhile, has raised its full-year profit guidance twice already this year.
In addition, Deutsche Bank analysts think GE will report earnings per share of $1.20 in the third quarter compared to the Wall Street consensus of $1.11, fueled by improved commercial aerospace margins, increased spare part sales, and relatively more widebody parts sales.
Is GE Aerospace stock a buy?
GE Aerospace has excellent momentum, and the slower ramp-up for LEAP engine deliveries -- management now expects a 0%-5% increase in LEAP engine deliveries compared to a 20%-25% increase forecast at the start of the year -- is positive for near-term profitability as airplane engines tend to be loss-making.
In addition, Boeing and Airbus' lowering of full-year delivery expectations means older GE engines are being run more, helping generate higher-margin aftermarket revenue. The company has many positive near-term headwinds.
Still, with the stock trading at slightly less than 36 times estimated 2025 earnings, it's hard not to think the good news is already priced in, and at some point, GE will ramp up loss-making engine deliveries. All told, while the $212 price target looks achievable over time, it might take a while to get there, given the current valuation.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends RTX. The Motley Fool has a disclosure policy.
