What happened
Shares in industrial conglomerate General Electric (NYSE: GE) beat the market today, rising 2% by midday. The move came after RBC Capital analyst Deane Dray raised his price target on the stock from $87 to $93; the stock currently trades at about $85.
It's a confident move by Dray, considering that GE will hold an investor conference on March 9. Wall Street analysts often wait until after such an event before changing price targets and ratings.
CEO Larry Culp's recent presentations have given confidence to investors and the analyst community.
So what
At the recent Barclays Industrial Select Conference, Culp had positive comments about all three of GE's remaining businesses.
In aerospace, he confirmed an expectation for 15% earnings growth with flat profit margins compared to 2022. That's an excellent result considering GE Aerospace sees LEAP engine volumes ramping up by 50% in 2023. Aircraft engines are typically sold at a loss, so the increase in production is dilutive to profit margins; the real money is made in multidecades of aftermarket sales.
On the military side of aerospace, Culp said GE was off to a good start to 2023, and internal improvements "will yield sequential output improvements as we go through the year, a year where we should see high-single-digit growth" in military service obligations revenue.
Lastly, in power and renewables (to be combined as Vernova), Culp said that the pressure on energy caused by the war in Ukraine had changed the "policy discussions" on investment in gas, nuclear, and renewables, making it "in many respects fundamentally better than it was 12 months ago. And that's a good thing for Vernova's prospects going forward."
Now what
All attention will be focused on the investor conference in March, particularly what GE will say about 2024 when Vernova will be spun off -- something to look out for.
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