On May 29, 1453, Constantinople, the capital of the Byzantine Empire, fell to the Ottoman Empire after a 53-day siege, an event that historians say marked the end of the Middle Ages.
Now you may be asking: That’s very interesting, but what the hell does it have to do with me?
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Well, just keep your shirt on and we’ll get it to that in a minute.
Our story moves to the modern world, where on Tuesday, April 23, General Electric posted better-than-expected first-quarter earnings and lifted its full-year-profit forecasts, as what was the iconic industrial group launched its new future as an aerospace company.
Earlier this month, GE completed its historic split into three separate and independently operated companies: GE Healthcare, GE Vernova and GE Aerospace.
In its final report as a combined company, General Electric posted adjusted earnings of 82 cents a share, more than double the year-earlier tally and well ahead of the Wall Street consensus estimate of 66 cents a share.
GE Aerospace, which inherits the (GE) ticker on the NYSE, saw revenue rise 15% to $8.1 billion, with operating profit up 24% to $1.5 billion.
On April 23, Larry Culp, who was chief executive of the group and now helms GE Aerospace, welcomed analysts to “our first earnings call as GE Aerospace, now a pure-play global leader in propulsion, services and systems.”
GE Aerospace CEO Larry Culp.
Ilya S. Savenok/Getty Images
CEO notes ‘incredible responsibility’
“We’re wholly focused on our aerospace and defense customers, serving the 900,000 passengers in the air right now with our technology under wing,” Culp said.
“It’s an incredible responsibility for our teams globally and why we take safety and quality so seriously,” he said.
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Culp said that the company’s commercial propulsion fleet is the industry’s largest and youngest, “thanks to our world-class engineering and services teams.”
“And in defense, we’re proud to be the rotorcraft and combat engine provider of choice, powering two-thirds of these aircraft worldwide,” he said. That’s “a massive part of our businesses and aftermarket services, representing 70% of our $32 billion in revenue.”
Culp has also forecast that operating profit for the new GE business would reach $10 billion by 2028, citing the surge in aircraft demand tied to two of its biggest customers: Boeing and Airbus (EADSY) .
Analysts react to GE Aerospace report
Several Wall Street analysts responded positively to GE Aerospace’s results and adjusted their stock price targets accordingly.
Bank of America analysts raised their stock price target on GE Aerospace to $180 a share from $165 and reiterated their buy rating.
B of A referred to Boeing’s (BA) recent “quality issues,” including a Jan. 5 incident in which a door plug blew off an Alaska Airlines (ALK) flight shortly after takeoff, which the investment firm said “impacted the entire aerospace industry.”
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“Investors are concerned about how difficult the production turnaround could be and how this could affect the entire ecosystem (from airlines, to competitors, to suppliers),” B of A said in a research note. “However, this is not new.”
The firm’s analysts said that they have highlighted over the past decade the deteriorating engineering strength and quality erosion at Boeing, “yet, the story is not over and we see a brighter future ahead.”
Now, here’s where Constantinople comes in. (See, we told you we’d get there.)
“In a parallel to the Middle Ages, we view the ongoing Boeing struggles as representing the fall of Constantinople that marked the official end of the Dark Ages,” B of A said.
Analysts see an ‘Aerospace Renaissance’
“GE Aero is Da Vinci, Galileo, or Shakespeare,” the firm continued. “GE’s focus on operational excellence, safety & quality, supply chain health and R&D to create the future of aerospace positions the company to lead the Aerospace Renaissance, in our view.”
B of A analysts said GE was strongly positioned to benefit from secular commercial aerospace growth.
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“The company boasts a unique portfolio with exposure across aircraft [original-equipment] manufacturers, aircraft classes, legacy/new/next generation platforms, and aftermarket/OE customers,” the firm said.
GE is not only differentiating among other aerospace names on how strongly it is managing the present, B of A said. The company also leads the R&D efforts to create the future of aerospace, as the company will invest nearly $2 billion of R&D this year in commercial and defense opportunities.
Other analysts stepped up to show their support for GE Aerospace.
Argus raised the firm’s price target on the company to $180 from $170 per share and kept a buy rating on the stock after the better-than-expected first-quarter results.
The company’s earnings remain understated due to the ongoing turnaround, management has shown confidence in GE’s outlook by raising the quarterly dividend, and the stock’s valuation measures “remain attractive,” the analyst tells investors in a research note.
Citi raised the firm’s price target on GE Aerospace to $186 from $120.43 and reiterated a buy rating on the shares. The company’s first quarter was better than expected and it modestly increased its full-year outlook for earnings before interest and taxes, the investment firm said. It added that commercial after-market demand remains robust.
RBC Capital Markets analysts also boosted their price target, to $175 from $165, while affirming their outperform rating. They expressed confidence in GE Aerospace’s 2024 outlook, supported by the strong financial metrics reported for the first quarter.
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