Long-established in the Aerospace & Defense industry, GE Aerospace (GE, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 1.85%, juxtaposed with a three-month change of 58.46%. However, fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of GE Aerospace.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 6/10
- Profitability rank: 4/10
- Growth rank: 5/10
- GF Value rank: 1/10
- Momentum rank: 6/10
Based on the above method, GuruFocus assigned GE Aerospace the GF Score of 64 out of 100, which signals poor future outperformance potential.
Understanding GE Aerospace's Business
GE Aerospace is the global leader in designing, manufacturing, and servicing large aircraft engines, along with partner Safran in their CFM joint venture. With its massive global installed base of nearly 70,000 commercial and military engines, GE Aerospace earns most of its profits on recurring service revenue of that equipment, which operates for decades. GE Aerospace is the remaining core business of the company formed in 1892 with historical ties to American inventor Thomas Edison; that company became a storied conglomerate with peak revenue of $130 billion in 2000. GE spun off its appliance, finance, healthcare, and wind and power businesses between 2016 and 2024. With a market cap of $180.99 billion and sales of $69.52 billion, GE Aerospace operates with a 5.9% operating margin.
Profitability Breakdown
GE Aerospace's low Profitability rank can also raise warning signals. The company's Operating Margin has declined over the past five years, with figures showing a decrease from 5.71% in 2019 to a low of 0.48% in 2022, before a slight recovery to 5.26% in 2023. This trend indicates challenges in maintaining profitability.
Additionally, GE Aerospace's Gross Margin has also seen a decline over the past five years, with a drop from 28.12% in 2019 to 23.18% in 2021, and a modest rebound to 25.84% in 2023. This pattern underscores the company's struggles to convert its revenue into profits, which is a critical aspect of financial health.
Next Steps
Considering GE Aerospace's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While the company has a rich history and a strong presence in its industry, the current financial indicators suggest that investors should proceed with caution. The GF Score, a reliable tool for assessing stock performance potential, indicates that GE Aerospace may face challenges in outperforming the market in the near future.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen.
As GE Aerospace navigates through these turbulent financial waters, will it be able to steer back towards its legacy of success, or will the current headwinds prove too strong? For value investors, the answer lies in diligent analysis and strategic foresight.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
