Please ensure Javascript is enabled for purposes of website accessibility

Why General Electric Stock Fell 5% This Morning

By Rich Smith – May 14, 2020 at 11:31AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

GE is not immune from the troubles of the travel industry.

What happened

Shares of industrial giant General Electric (GE -1.81%) fell more than 5% in early trading Thursday before recovering to about a 2.3% loss as of noon EDT.

Why is GE stock suffering? Airplanes may be the answer.

The silhouette of an airplane over a world map labeled "coronavirus"

Image source: Getty Images.

So what

A couple of days ago, key GE customer Boeing reported selling precisely zero new airplanes in the month of April. Subtracting out plane orders that have been canceled, or ordered by airlines so financially unsound that it's unlikely they'll actually be able to pay for them, Boeing has suffered a net drop in plane orders of 516 aircraft so far this year.  

Logically, that's not good news for GE's airplane engine business.

Adding to the company's troubles, it was reported yesterday that the U.S. and Canada are probably going to extend their restrictions on non-essential travel between the two countries through June 21. Combined with a similar travel advisory that the European Union issued last week, the net effect of this is going to be to keep air travel levels depressed for at least another month, decreasing the demand for new airplanes (and airplane engines) in the near term. At the same time, this will increase the chances of one or more airlines going out of business -- subsequently decreasing demand for airplanes and engines in the longer term as well.  

Now what

General Electric may be a link or two up the supply chain from the airline business, which is suffering the brunt of COVID-19-inspired stay-at-home orders and travel bans. That's not helping the stock much today, though, or protecting it from the inevitable fallout of decreased demand for air travel.

Until the airline business recovers, times are going to remain tough for GE.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

General Electric Company Stock Quote
General Electric Company
$66.22 (-1.81%) $-1.22

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.