synthetic electricity (GE) is poised to emerge as an airline company as early as 2024 after shedding a bunch of businesses over the past few years. Should GE stock buy after the big rally?
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GE news
In the third quarter, GE earnings fell 39%, The industry giant said on Oct. 25. Weakness in the renewable energy business offsets strength in the airline industry.
However, that follows EPS gains of 85% and 255% in the previous two quarters
In early January, General Electric spun off its healthcare business, GE Healthcare Technologies (GEHC). Separation of energy and renewable energy businesses is set for early 2024.
That would pave the way for the “new GE”, GE Aviation, to emerge.
Industrial companies are grappling with supply chain problems and macro uncertainties. Other headwinds include rapidly rising inflation, the Covid-19 situation in China, and the Russo-Ukrainian war.
GE stock up in 10 days
Shares of General Electric rallied for the 10th straight session on January 12, in a strong bounce from the 10-week moving average during that time period. GE stock is just below a 52-week high of 80.98 and above its 50-day moving average. It is working on 90.74 buy points in a long and deep cup base.
The relative strength line for GE stock hit a 52-week high, according to MarketSmith . chart. An upward RS line means a stock is doing better than the S&P 500. This is the blue line in the chart shown.
The industrial giant earns a IBD Composite Rating out of 72 out of 99, according to IBD Stock Checker Tool. The rating combines the main technical and fundamental indicators in a single point.
General Electric owns a RS Rating of 95, which means it has outperformed 95% of all stocks in IBD’s database over the past year.
GE remains a popular stock on Wall Street. As of September, 1,825 funds own stocks.
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GE income
Across key earnings and revenue metrics, GE stock earns one EPS Rating of 42 of the best 99 possible, and SMR . Rating of D, on a scale from A (best) to E (worst). The EPS rating compares a company’s earnings-per-share growth to all other companies. The SMR rating reflects revenue growth, profit margin, and return on equity.
GE’s earnings for the third quarter were led by its airline business.
The company also reported improvement in the healthcare segment, but its energy business lagged behind.
Free cash flow (FCF) is growing. The FCF measure is closely monitored as an indicator of GE’s performance status. It plunges in 2020, then rises again in 2021.
On January 24, GE will report earnings for Q4 2022. Management guidance on 2023 earnings and FCF, following January subsidiary GE HealthcareCare, are awaited.
Out of 22 Wall Street analysts, 15 rate GE stock as a buy. Seven people hold and no one sells.
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GE Aviation
Aviation – GE’s “jewel” – produces jet engines and avionics systems for aircraft manufacturers including Boeing airplanes (father). GE Aviation also runs a lucrative aftermarket business for engine repair and maintenance.
During the pandemic, travel restrictions to prevent the spread of Covid-19 have negatively affected aircraft deliveries and orders.
Aerospace suppliers are also struggling to deliver parts and equipment on time due to shortages of semiconductor chips and plastics caused by the pandemic. Aluminum and steel prices also increased. Then the disruption from the Ukraine war hurt the supply chain.
For GE Aviation, many of these difficulties show signs of abating.
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General Electric’s competitor
General Electric’s competitors include Raytheon Technology (RTX) and Siemens‘ (SIEGY) Energy unit.
Britain’s Raytheon and Rolls-Royce are big competitors to jet engines. Siemens Energy competes for power with GE.
Other industry peers include 3M (MMM), honey (FEMALE) and roper technology (ROP).
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Should GE Stock Be Buy Now?
General Electric is poised for a major transformation, shedding its diverse past to emerge as an aviation-focused business.
However, recession fears are growing as rising interest rates to control inflation weigh on global economies. The inflationary climate and the Russo-Ukrainian war add to business uncertainty.
For a cyclical industrial giant like General Electric, these are challenging headwinds.
From a technical perspective, GE stock rallied largely on aviation momentum. Share near 52-week high but below 90.74 buy points from the base of the cup.
Bottom line: Don’t buy GE stock.
Over the long term, buying an index fund, such as the SPDR S&P 500 (spy), will offer higher, safer returns than GE stock. If you want invest in a large-cap stock, IBD offers some powerful ideas here.
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