Long-established in the Aerospace & Defense industry, GE Aerospace (GE, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 3.06%, juxtaposed with a three-month change of 51.05%. 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 63 out of 100, which signals poor future outperformance potential.
Understanding GE Aerospace's Business
GE Aerospace (GE, Financial), with a market cap of $164.07 billion and sales of $67.95 billion, is a global leader in air travel and the energy transition. The company, which traces its roots back to the combination of two companies in 1892, including one with historical ties to American inventor Thomas Edison, is known for its differentiated technology and massive industrial installed base of equipment. This includes aerospace engines, gas and steam turbines, and onshore and offshore wind turbines. GE Aerospace earns most of its profits from the service revenue of that equipment, which is generally higher-margin. Under the leadership of Danaher alumnus Larry Culp, GE Aerospace is navigating through a strategic breakup of its businesses.
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.
Furthermore, 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, followed by a modest increase to 25.84% in 2023. This pattern underscores the company's struggles to efficiently convert its revenue into profits, which is a critical aspect of financial health and operational efficiency.
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 industrial presence, the current financial indicators suggest that investors should proceed with caution. The challenges reflected in the GF Score may impact the company's ability to outperform in the future, making it essential for investors to monitor these metrics closely.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
In conclusion, while GE Aerospace has been a formidable player in its sector, the GF Score analysis indicates that there are significant obstacles that could hinder its growth and profitability. Will GE Aerospace be able to navigate through these challenges, or will it succumb to the pressures of an increasingly competitive landscape? Investors must weigh these factors carefully when considering their investment decisions.
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.
