Breaking News

GE Aviation: A Shining Star In Slowing Aerospace Sector?

By Zacks Investment ResearchJun 19, 2019 06:57AM ET
GE Aviation: A Shining Star In Slowing Aerospace Sector?
By Zacks Investment Research   |  Jun 19, 2019 06:57AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

At the Paris Air Show this week, all eyes in the aviation industry are watching how recent turmoil will impact order performance. The past few years have been stellar for the industry, with growth 40% higher than the market over the last three years. But this positive growth trend may be about to change.

Industry Struggles

There have been many recent indicators that the aviation industry, which is highly cyclical, will hit a downturn soon. In an interview this week, Centre for Asia Pacific Aviation chairman Peter Harbison stated that “We probably did see a peak in aircraft order last year which… seems to precede the year when things turn down.” Meanwhile, demand in global air freight markets fell by 4.7% from this time last year, according to the International Air Transportation Administration. The IATA also cut its expected 2019 airline profits by 6.67% to $20 billion.

Order numbers are in fact slacking at the 2019 Paris Air Show. Wednesday marked only the third day of the four-day event, but orders are on pace to be 375 planes lighter than last year, a 25.6% decrease.

The jetliner industry is essentially a duopoly, with Airbus (OTC:EADSY) and Boeing (NYSE:BA) making up 89.6% of jet aircraft deliveries in 2017. As a result, Boeing’s recent struggles have impacted the entire industry. The two tragic crashes of Boeing’s 737 MAX aircraft and the subsequent grounding only caused 49 out of 5,008 orders to be cancelled. Yet recent focus groups indicate that many travelers would not be willing to fly on one of these planes. Meanwhile, the Boeing 777x, which is currently in development, has had its timeline delayed due to engine issues during testing. As a result, Boeing’s earnings estimates for this year and next have recently been revised down.

GE Rising Above

General Electric (NYSE:GE) is one company that seems to have been relatively untouched by the industry struggles. GE’s aviation division makes up about 30% of the company, and holds the largest market share in commercial turbofan engines and military aircraft engines. Plus, its sales are not tied specifically to one aircraft manufacturer, which helps create more stability.

However, GE has a rocky past. Its market cap was up over $260 billion twice over the last 15 years, both times falling to around $90 billion soon after. The current market cap is $90.87 billion as of Wednesday, meaning investors may start to bring up its stock price as GE is at the bottom end of its historical market cap.

Over the past year, GE has underperformed its peer group as shown below. However, some of this can be attributed to GE Power (26% of revenues) showing very little profit, and GE Lighting (4%of revenues) slowly becoming obsolete.

GE is currently a Zacks Rank #2 (Buy), based, in large part, on its recent positive earnings estimate revision activity for this year and next. Zacks Estimates also predict a growth rate next year that is 13% higher than the market.

At the Paris Air Show, GE did $24 billion in sales on the first day, with self-projections calling for more than $35 billion total. This would be a record-breaking sales week for GE, and has the possibility to further boost earnings estimates in the coming weeks.

Bottom Line

The aviation industry seems to be at a tipping point and looks like it may take a dive in the coming year, especially when taking its cyclical history into account. But GE has billions in orders with no big issues in sight. GE also puts roughly $1 billion a year into R&D for its commercial engines, so one can reasonably expect the firm to stay at the forefront of aviation engine manufacturing for a long time.

This Could Be the Fastest Way to Grow Wealth in 2019

Research indicates one sector is poised to deliver a crop of the best-performing stocks you'll find anywhere in the market. Breaking news in this space frequently creates quick double- and triple-digit profit opportunities.

These companies are changing the world – and owning their stocks could transform your portfolio in 2019 and beyond. Recent trades from this sector have generated +98%, +119% and +164% gains in as little as 1 month.

Click here to see these breakthrough stocks now >>

Airbus Group (PA:AIR) (EADSY): Free Stock Analysis Report

The Boeing Company (BA): Free Stock Analysis Report

General Electric Company (GE): Free Stock Analysis Report

Original post

Zacks Investment Research
GE Aviation: A Shining Star In Slowing Aerospace Sector?
GE Aviation: A Shining Star In Slowing Aerospace Sector?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email