stock has been just fine during the recent market slide. It could be the strength of management or the outlook for commercial aerospace. Or it could just be Wall Street.
Fine is an understatement. Coming into Thursday trading, GE Aero stock has been the best stock in the entire
for April, according to Bloomberg, up about 11% month to date. The index was down about 4%.
It isn’t the aerospace industry.
stock have had a terrible April, dropping almost 12%.
Boeing
,
however, is having issues with manufacturing quality and production speed. The move in other aerospace supplier stocks, besides GE, including
RTX
,
and
averaged out to down a little.
Wall Street looks like it deserves most of the credit for GE’s relative strength.
On April 2, General Electric split into GE Aerospace, which kept the “GE” stock symbol, and
which trades under the ticker “GEV.” Since then Wall Street has been redoing earnings estimates and price targets for both companies.
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The updated target prices for GE Areo have been better than expected. Before the spin, GE stock was trading at about $175 which included about $35 a share for
based on where that stock was trading headed into the spin.
(Shares of soon-to-be spun-off companies often trade in a “when issued” basis before spins are completed so investors get an early sense of valuation.)
That left about $140 for GE Aerospace stock. Updated price targets range from about $150 to $190 and are averaging out to about $172, according to FactSet. The most recent four updates from this week average out to about $170.
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GE Aero stock, as a result, has moved up about $15 from pre-spin levels, settling at $155, or about 11% below the updated price targets. That’s a similar gain implied by the average price targets for stocks in the S&P 500.
At $155, GE Aero stock is trading for about 29 times estimated 2025 earnings per share. The S&P 500 trades for closer to 19 times. Wall Street is putting a premium multiple on GE Aero price targets because they see margins improving and demand for commercial air travel growing in the future.
The post-spin valuation reset looks like it’s just about done. That means future gains in GE Aero stock will depend on how good the demand for air travel is and how fast management can improve margins.
GE Aero stock was up 1.1% to $ 157.39, while the S&P 500 was up 0.5% and the
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had risen 0.4%.
Write to Al Root at allen.root@dowjones.com
