Will The Rally In GE Aerospace Continue?

GE Aerospace (NYSE: GE) has delivered exceptional performance, with its shares surging from about $100 in early 2024 to $270 currently—a remarkable 2.7x increase. This rally reflects the company’s successful transformation into a focused aerospace pure-play driven by its strategic breakup, a high-margin services business, significant debt reduction, and strong operational performance, including robust demand for its LEAP engines.

So, what could propel the stock to another 2x rally, pushing it past $500? We’ll explore the factors that could drive this growth in the sections below. But, for those looking for less volatility than a single stock, the High Quality Portfolio offers an attractive alternative. Since its inception, this portfolio has delivered over 91% in returns, comfortably outperforming its benchmark (a blend of the S&P 500, Russell, and S&P mid-cap indexes). Also, see – UnitedHealth: What’s Happening With UNH Stock?

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Growth Drivers for 2x Upside to $500+

Several factors could potentially drive GE Aerospace to double again from current levels:

• Unprecedented Capital Investment: The company is investing nearly $1 billion in U.S. manufacturing in 2025, nearly doubling the previous year’s commitment, which should significantly expand production capacity and capabilities.
• LEAP Engine Production Scaling: Plans to deliver 2,500 LEAP engines by 2028, sufficient to power over 1,000 aircraft, representing massive production scaling from current levels.
• Commercial Aviation Recovery: Continued global aviation demand recovery and fleet modernization trends, particularly in emerging markets where air travel growth remains robust.
• Services Revenue Growth: Strong performance in the commercial services segment, which carries higher margins than original equipment manufacturing. The high-margin services business continues expanding with the growing installed base of GE engines, creating a compound effect on profitability. Also, the company’s overall backlog exceeds $175 billion, providing substantial revenue visibility. See – GE Aerospace Revenue Comparison.
• Technology Leadership: Development of next-generation technologies including the XA100, GE9X, and RISE engine program, positioning GE for future market leadership in sustainable aviation.
• Defense Spending: Increased global defense spending could boost demand for military aerospace applications. Recent examples include Trump’s push for NATO members to increase defense spending to 5% of GDP, with Lithuania and Estonia already pledging to exceed 5% beginning in 2026 until at least 2030.
• Margin Expansion: GE has seen its operating margin expand consistently over the recent years. It currently stands at 19.1% aligning with 18.8% figure for the benchmark S&P 500 index. But, further operational improvements and economies of scale as production ramps up could result in a continued margin expansion.

Valuation Scenarios

While GE has provided conservative guidance of $8.40 per share in adjusted earnings for 2028, we believe the company is well-positioned to exceed this target, potentially reaching $9.20 per share (doubling from $4.60 in 2024). Using this more optimistic earnings projection, three valuation scenarios emerge:

• Conservative Scenario (P/E 30x): Target price of $280 —Limited upside, assuming significant multiple compression despite earnings growth.
• Base Case Scenario (P/E 40x): Target price of $370 — Approximately 40% upside, reflecting moderate multiple compression with solid earnings growth.
• Optimistic Scenario (P/E 55x): Target price of $500+ — nearly 2x upside, maintaining elevated multiples supported by strong growth momentum and market leadership position.

The optimistic scenario could be supported by sustained high growth rates, market leadership in next-generation technologies, and continued margin expansion in the high-value services segment.

But Of Course There Are Risks

Several risks could impede the path to $500+:

• Valuation Risk: At 48x trailing earnings, the stock is surely expensive and vulnerable to multiple compression if growth disappoints or market sentiment shifts. Our GE Aerospace Valuation Ratios dashboard has more details.
• Cyclical Industry Exposure: Aerospace is inherently cyclical, and any economic downturn could significantly impact demand for both new aircraft and maintenance services.
• Boeing 737 MAX Risks: Exposure to Boeing’s ongoing challenges through the LEAP engine program could impact deliveries and revenue.
• Competitive Pressures: Intense competition from Rolls-Royce and Pratt & Whitney could pressure market share and pricing power.
• Execution Risk: The ambitious production scaling and capital investment plans carry significant execution risk, particularly in a complex manufacturing environment.
• Interest Rate Sensitivity: Higher interest rates could impact airline capital expenditure decisions and make high-multiple stocks less attractive.
• Geopolitical Risks: Trade tensions, export restrictions, or international conflicts could disrupt global aerospace markets.
• Market Risks: GE stock has a history of faring worse than the broader markets in events of economic downturns, as explained in our take on Buy or Fear GE stock.

The Verdict

GE Aerospace represents a compelling growth story with clear catalysts for continued expansion. The company’s transformation into a focused aerospace leader, combined with strong market positions in both equipment and services, creates a foundation for sustained growth. The projected earnings doubling to $9.20 per share appears achievable given current momentum and investment plans.

However, the current 48x earnings multiple leaves little room for error and assumes continued execution excellence. While the optimistic scenario reaching $500+ is possible, investors should carefully weigh the substantial risks against the growth potential. While this analysis focuses on upside potential scenarios, we also maintain a downside case analysis that considers potential headwinds and valuation compression risks.

See, there always remains a meaningful risk when investing in a single, or just a handful, of stocks. Consider the Trefis High Quality (HQ) Portfolio which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

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