The stock now known as GE Aerospace (GE +1.49%) contains the core of what used to be the conglomerate General Electric. Over the past few years, one of the world's largest industrial conglomerates has slimmed down through asset sales and divestitures.
The final split-up occurred in 2023 and 2024, when GE completed the stock spinoffs of GE HealthCare Technologies (GEHC +2.03%)and GE Vernova (GEV +3.98%), the company's energy equipment division. Following these spinoffs, GE Aerospace became a pure-play aerospace company, focused on GE's jet engine and aerospace products manufacturing businesses.
To longtime fans and employees of GE, this moment may have marked the sad, quiet end to a century-old industrial empire. But for shareholders, this transformation has proven very profitable.
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GE Aerospace has crushed the market, rocketing to a high valuation
In 2023, before the final split-up, General Electric was trading for around $80 per share. Now, the stock changes hands for over $300 per share. Year-to-date alone, the stock is up a staggering 80%, handily outperforming the overall stock market.
With this outperformance, GE Aerospace is seeing massive valuation expansion. Wall Street has never been a big fan of the conglomerate business model. With the exception of perhaps Warren Buffett's Berkshire Hathaway, most conglomerate stocks have experienced the "conglomerate discount" effect, or a discounted valuation relative to stocks focused on one particular industry.
General Electric may have once traded at a "conglomerate discount," but as an aerospace pure-play, it's arguably become pricey. With a forward price-to-earnings ratio, or forward P/E, of around 42, GE Aerospace trades at a premium to other large aerospace companies, like RTX. RTX trades at a forward P/E of around 26.
Then again, shares in another aerospace giant, Boeing, trading for nearly 100 times forward earnings, are even pricier. Much of this has to do with the aerospace industry's current strong growth prospects.
NYSE: GE
Key Data Points
Should you buy General Electric stock?
The aerospace industry benefits greatly from robust commercial and defense-related demand. GE Aerospace is no exception, as seen in the company's latest "beat and raise" quarterly results.
As one sell-side analyst, Vertical Research Partners' Rob Stallard, recently argued, GE Aerospace could continue to trade at a big premium to names like RTX, "as long as it continues to generate strong earnings and cash flow growth." That said, you may not want to rush out and buy GE Aerospace today, just on the view that this growth story will continue.
Even during their bull run, shares have encountered some macro-related hiccups -- for instance, during last spring's "tariff tumult." Renewed fears of a recession could also negatively affect this stock's near-term performance. However, if you are a long-term-focused investor, there may be merit in steadily building a position in GE Aerospace on any pullback.
Given the strength of its aerospace business, coupled with the talented leadership of CEO Larry Culp (who prior to running GE Aerospace was CEO of Danaher, another conglomerate success story), you can consider it one of the strongest blue-chip stocks out there.
