GE Aerospace (GE 0.48%) received a slew of upgrades following its first-quarter earnings report, including one from Bank of America analyst Ronald Epstein, who raised the price target to $180 from $165 while maintaining a buy rating.
The target represents a 14% upside from the current price. According to The Fly, it reflects GE's "unique portfolio" of assets, including narrow and widebody aircraft, original equipment manufacture (OEM) and aftermarket, and legacy and next-generation airplane platforms.
GE Aerospace's first quarter
It's a fair assessment, and the strength of the company's broad-based exposure shone through in the first-quarter earnings report and guidance. In the results, some investors were concerned about the impact of the slowdown of deliveries at Boeing on aerospace suppliers. GE Aerospace's joint venture with Safran, CFM International, makes the LEAP engine -- the sole engine option on the Boeing 737 MAX.
Indeed, GE cut its estimate for growth in LEAP deliveries to 10%-15% in 2024 from a previous estimate of 20%-25%.
While it's not in GE's long-term interests for LEAP engines to be delayed (although airplane engines are sold at a loss, engine manufacturers generate decades of lucrative aftermarket revenue as engines are used), the broad-based exposure comes to the fore even in a scenario of delayed LEAP deliveries.
For example, a delay in new airplane deliveries will likely lead to older planes being run more. That's good news for GE, given its dominant position on legacy engines, such as the CFM56, used on the Airbus A320 family and Boeing 737 planes (legacy airplanes).
Image source: Getty Images.
More aftermarket revenue
Indeed, an analyst asked if the LEAP delays would push out the peak of shop visits on the CFM56 -- a good thing as it means more aftermarket revenue from the engine. CEO Larry Culp said it would, but declined to estimate how much that pushout would be. "But it's a positive dynamic for us in the aftermarket, both with existing platforms and increasingly with the LEAP," Culp added.
That's the benefit GE's broad exposure provides, and that's why the stock remains attractive to aerospace followers.
