Shares of GE Aerospace (GE +2.12%) traded nearly 3% lower in the final hour of trading despite a Wall Street analyst lifting his price target on the stock.
Thriving in the commercial aero aftermarket
In a note published this morning, Bernstein analyst Douglas Harned maintained his outperform rating on GE and lifted his price target from $232 to $250. The stock currently trades around $200.
Harned cited the company's strong positioning in the commercial aerospace aftermarket and compared GE to the French aerospace company Safran. GE and Safran successfully partner on several engine programs, but GE has a larger share of the CFM56 engine aftermarket.
NYSE: GE
Key Data Points
He also sees GE well positioned in the LEAP and widebody engine markets, which could provide future tailwinds, particularly in the widebody space, where GE generates superior margins compared to Safran.
Despite the positive note, stocks fell across the board thanks to hotter-than-expected inflation data. The Dow Jones Industrial Average had fallen roughly 700 points after data this morning showed that the Personal Consumption Expenditures (PCE) Index rose 0.4% in February from the prior month, while the index came in 2.8% higher year over year. Both numbers were slightly above estimates and point to higher inflation. Meanwhile, consumer spending rose 0.4% in February, slightly less than expected.
No fighting the macro
There was no specific news that led to the decline in GE Aerospace's shares today. But stocks often struggle to overcome bad macronews.
While the slight miss on PCE estimates may not seem like a big deal, the combination of higher inflation and slower consumer spending increases the risk of stagflation, which is likely a worst-case scenario for the economy. Stagflation puts the Federal Reserve in a bind because if the agency raises interest rates, it could further stymie economic growth, while lowering rates could accelerate inflation further.
That said, I think GE Aerospace is a fine stock to own. CEO Larry Culp has done a good job of transforming the company, which looks well positioned for growth.
