In a recent industrials outlook note, Bank of America has labeled General Electric (GE) as an “incoming pure-play aviation stock,” indicating strong confidence in the company’s future prospects. Analyst Andrew Obin believes that GE is poised for significant growth in 2024 as it continues to divest its non-aviation businesses. This article will delve into the reasons behind Bank of America’s bullish stance on General Electric and its outlook for the company in the coming year.
GE’s Strategic Transformation
General Electric has been strategically transforming its business portfolio over recent years. One of the key moves in this transformation is the scheduled spin-off of its energy and renewables segment, Vernova, in the spring. This separation is expected to have a profound impact on GE Aerospace, leading to a re-rating of its value.
Projected Growth in 2024
Bank of America’s analyst, Andrew Obin, has high expectations for General Electric’s performance in 2024. He forecasts a remarkable 59% year-over-year earnings per shareEarnings per share (EPS) is a fundamental financial metric that provides valuable insights into a company's profitability. This widely used indicator helps investors and analysts g... (EPS) growth for the company. This growth is anticipated to be driven by increasing profits in the Aerospace division and a reduction in losses in the Renewable segment.
Impressive Stock Performance
In the current year, General Electric’s shares have demonstrated impressive performance, with a gain of more than 90%. Despite this substantial increase, Obin believes that there is still room for further growth in the stock’s value. He attributes this growth potential to the supportive stance of U.S. policy, which is favoring the reshoring of critical industries and the exploration of new markets.
Focus on the Aviation Sector
One of the key factors contributing to Bank of America’s optimism is GE’s commitment to the aviation sector. By becoming a pure-play aerospace stock in April following the spin-off of Vernova, GE is poised to capitalize on the opportunities in the aviation industry. This strategic focus aligns with the bank’s bullish outlook on the company.
Confidence in the U.S. Manufacturing Capex Cycle
Despite near-term macroeconomic uncertainties, Bank of America maintains its confidence in the U.S. manufacturing capital expenditureIn the realm of corporate finance, Capital Expenditure (CapEx) play a crucial role in shaping the future trajectory of a company. From acquiring new assets to upgrading existing in... (capex) cycle. This outlook is significant for General Electric, as it operates in the industrial and manufacturing sectors. The bank’s confidence in the manufacturing capex cycle further supports its positive stance on GE’s earnings growth potential.
Bottom-line: Bank of America’s characterization of General Electric as an “incoming pure-play aviation stock” reflects its strong belief in the company’s prospects. The upcoming spin-off of Vernova is expected to trigger a re-rating of GE’s Aerospace unit and drive substantial earnings growth in 2024. Despite a notable increase in the stock’s value this year, the bank sees additional growth potential, fueled by U.S. policy support for critical industries and a renewed focus on reshoring. With a strategic transformation and a clear emphasis on the aviation sector, General Electric appears well-positioned to capitalize on future opportunities and deliver significant value to its shareholders.
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