The first catalyst I see driving GE stock higher this week is the company's announcement on Monday that it is making tenders to buy back up to $2 billion worth of notes that it has issued. This tender offer, the company said, is part of a previously announced plan to strengthen its balance sheet and achieve a target of a 2.5 multiple of net debt to EBITDA. This plan has already seen GE retire $43 billion worth of gross debt over the past couple of years.
The second catalyst is something that might help generate the cash that GE needs to pay down its debt even further. For about a week now, rumors have been flying that GE customer Boeing (BA 0.52%) might be raising the production rate on its 737 MAX aircraft from the current 31 planes per month to as high as 42 by early next year. Today, we got the additional good news, confirmed by the company this time, that Airbus (EADSY 0.32%) is following suit.
By 2022, Airbus will accelerate the production of both A220 and A350 aircraft by 20%, to six of each model per month. Production of the workhorse A320 will grow 10% to 45 planes per month by the end of this year. A320 production will then rise to 64 per month by the second quarter of 2023 on the way to 70 per month by the first quarter of 2024 -- and maybe as many as 75 by 2025.
This is all obviously good news for General Electric, whose stock plummeted last year as revenue from its biggest division, aviation (i.e., airplane engines), declined more than 31% during the pandemic and profits collapsed 82%.
A revival of demand from General Electric's airplane engine customers would be a huge shot in the arm, and today you're seeing the effect that has on GE's stock.