General Electric (GE -0.60%) doesn't attract the same kind of attention that it did during Jack Welch's heyday as CEO or Jeff Immelt's unfortunate tenure. However, GE investors won't care about that because the stock is up 91% over the last year as Larry Culp continues his impressive company turnaround. The question now is whether the great run is over or not. 

What happened to General Electric

To answer this question, you must return to what happened to the company and the stock over the last year. In truth, it's a combination of the market realizing the value opportunity in the stock, management's excellent execution, and a consequent upturn in prospects across all three of its businesses. 

The value case for the stock was made last summer, but of course, for a stock to turn out to be "value," it needs growth, just as there's no point buying a growth stock unless there is "value" in the stock. The good news is that GE has delivered on the growth front. 

Headline guidance improvement 

A year ago, its aerospace business was growing strongly but faced supply chain challenges, notably in ramping commercial airplane engine production and across its defense business in general. The power segment was performing solidly. However, the renewable energy business was disappointing investors, and GE, along with its peers Vestas and Siemens Gamesa (now part of Siemens Energy), lowered guidance through 2022 as a combination of soaring raw material prices, supply chain issues, and previous orders secured at uncompetitive rates needed to be fulfilled. 

Fast forward to the second-quarter earnings report, and GE's management raised expectations overall and in each of its businesses. As a reminder, GE Renewable Energy and GE Power will combine and be spun off as GE Vernova in early 2024. 

The table below shows the headline guidance change through the year; changes are bold.  

General Electric Guidance

At July

At April

At January

Headline Guidance

Low double-digit revenue growth, adjusted earnings per share (EPS) of $2.10 to $2.30, free cash flow of $4.1 billion to $4.6 billion.

High single-digit revenue growth, adjusted EPS of $1.70 to $2, free cash flow of $3.6 billion to $4.2 billion.

High single-digit revenue growth, adjusted EPS of $1.60 to $2, free cash flow of $3.4 billion to $4.2 billion.

Data source: General Electric presentations. 

GE Aerospace

At GE Aerospace, the improving commercial aerospace environment is well documented as flight departures come back strongly -- great news for GE's aftermarket engine sales. Meanwhile, the company is overcoming its supply chain issues, and its on track to deliver 1,700 LEAP engines as Boeing and Airbus ramp production. 

There was even some good news on defense -- a market that's been particularly hard hit by supply chain constraints. According to CEO Larry Culp, "Defense improved this quarter, delivering significant growth. Orders more than doubled. Engine output increased with units up over 70% year-over-year" on the earnings call.

Management now expects GE Aerospace to contribute an operating profit of $5.6 billion to $5.9 billion compared to prior guidance of $5.3 billion to $5.7 billion in 2023.

GE Vernova (GE Power and GE Renewable Energy)

From being GE's most problematic business, GE Power is now a solid performer, and even though revenue declined 1% in the quarter, segment profit rose 18% due to substantial growth in its higher-margin services business, an area GE's management has focused on improving in recent years. 

Finally, Culp expects GE Renewable Energy revenue to grow high-single digits compared to prior guidance for mid-single digit growth. The segment is three interconnected businesses: onshore wind, offshore wind, and grid. It's a story of underlying improvement at onshore wind and grid, offsetting ongoing challenges in offshore as GE prepares that business for growth. 

Offshore wind turbines.

Image source: Getty Images.

The onshore business's core market is in the US, and GE benefits from increased orders as the Inflation Reduction Act spurs growth. Meanwhile, GE continues to improve pricing on its onshore wind orders in line with management's plans to be more selective over orders. Grid received "two more large HVDC [High Voltage Direct Current] projects" (to go with two significant orders in the previous quarter), and Culp noted that "even excluding these projects, Grid orders were up over 40%." 

Overall, strength in onshore and grid offset the negative impact of initial losses as GE builds its offshore business. 

A stock to buy

Despite the exceptionally strong move, there's still a case for GE stock being a good value. The aerospace recovery isn't over yet and has a long pathway of growth ahead as LEAP engines get serviced in the future. The defense business can grow earnings as supply chain constraints eventually ease. GE Vernova's outlook is improving – management now expects a loss of $400 million to $100 million compared to prior guidance for a loss of $600 million to $200 million.

Wall Street analysts expect $4.3 billion in free cash flow in 2023, with $6.3 billion in 2024, putting GE on less than 20 times free cash flow in 2024. That's a decent valuation and suggests some upside remains to GE's strong share-price run.