Up 125%, This Blue Chip Stock Has 1 Key Advantage That's Helping Investors Become Richer

General Electric (GE 0.68%) stock is up 125% over the last year and more than 78% in 2023 alone. It's a remarkable performance, all the more so because it comes at a time when its peers have floundered. There's a reason for the company's turnaround in recent years: excellent management and execution. Here's why GE has outperformed and why investors can expect more.

General Electric's three segments 

Management can point to improvements across all three of its current segments. As a reminder, GE Vernova (a combination of GE Power and GE Renewable Energy) will be spun off in early 2024, leaving the remaining company as GE Aerospace. The following table breaks out revenue from each segment, with further detail on businesses within the segment. 

Data source: General Electric SEC filings. 

LEAPING ahead

At GE Aerospace, management raised its full-year profit guidance to $5.6 billion to $5.9 billion from a previous range of $5.3 billion to $5.7 billion, so it has good momentum in 2023. However, investors should look further ahead, and in particular at the LEAP engine, made by its joint venture with Safran, CFM International. The LEAP engine is the sole option on the Boeing 737 MAX and one of two options on the Airbus A320neo -- the two narrow-body workhorses of the skies. 

Unfortunately, its rival engine provider on the Airbus A320neo, the geared turbofan (GTF) engine from RTX's Pratt & Whitney, has suffered issues relating to a potential contamination in powdered metal used to make turbine discs. As such, Pratt & Whitney will have to remove hundreds of engines for inspection over the next few years and suffer a $3 billion cash headwind. 

The LEAP engine has suffered no such issues, and it's hard not to think that airlines will now be induced to favor the LEAP over the GTF on the A320neo. This is an example of how good quality control and manufacturing execution generate value for investors. 

GE Vernova

It's no secret that end-market conditions in wind power have been very tough in recent years. A combination of previously ultra-competitively priced contracts and soaring raw material and logistics costs left the leading players in the West (GE, Vestas, and Siemens Energy's Siemens Gamesa, among others) facing severe margin pressure. Again, one of its major rivals, Siemens Gamesa, has experienced costly quality control issues in its turbines. Siemens Energy has withdrawn its full-year guidance amid stating associated costs of over $1 billion.

In contrast, GE Renewable Energy is set to return to profit in 2024 as management's efforts to be more selective over onshore wind contracts and increase pricing have resulted in higher equipment margins on new orders, especially in the U.S. "This will help drive improved profitability going forward," GE CEO Larry Culp said on the last earnings call.

Image source: Getty Images.

Meanwhile, the turnaround at grid solutions (from a negative 11% margin in 2021 to expectations for profitability in 2023) is a success story. There's more to come as grid orders grew 40% year over year in the second quarter, with at least four large orders in high-voltage direct current systems (HVDC) achieved in 2023 as spending on transmission ramps up to support grid stability in the age of renewable energy.

Turning to GE Power, the company's former problem segment has turned into a solid earnings generator thanks to management's strategy of working through legacy contracts while focusing on improving its services business. 

Data source: General Electric presentations.

What's next for General Electric

The quality issues with its aerospace and wind power rivals allow GE to win more orders while it continues to improve profitability in both businesses. Meanwhile, GE Power's turnaround is already a solid profit contributor. It speaks volumes for Culp's tenure as CEO and the management team he's assembled, and it essentially comes down to the kind of execution that wasn't always apparent under its previous CEOs. It bodes well for GE's future.