General Electric (NYSE:GE) has displayed a remarkable performance this year, with its shares surging by an impressive 36.4% year-to-date, surpassing the industry’s modest 0.4% decline. This impressive uptick can be attributed to several key factors, including the strength of the Aerospace segment, which constitutes a significant portion of the company’s revenue, the recovery in GE Vernova’s operations (the combined entity of GE Power and Renewable), and its shareholder-friendly initiatives.
The Aerospace segment has been a driving force behind GE’s growth, fueled by robust commercial aerospace activity. Notably, the surge in LEAP engine deliveries has contributed significantly to the segment’s revenue from commercial engines. Furthermore, the growth in the commercial services sector and a substantial increase in defense engine orders have further bolstered the segment’s prospects. In the first half of 2023, the Aerospace segment witnessed an impressive 27% increase in revenues and a 25% surge in orders.
After a period of sluggishness, the Power segment is showing signs of improvement, benefiting from the strength of GE Gas Power’s heavy-duty gas turbine services and the GE gas turbine business. In 2023, the Power segment is expected to achieve low-single-digit revenue growth, primarily driven by Gas Power services. The recent acquisition of Nexus Controls in April 2023, which enables the creation of a comprehensive controls business line for the development of GE’s proprietary Mark Vle controls systems platform, is expected to further enhance the segment’s growth.
The Renewables segment is also making strides, with increased demand for Grid and Onshore Wind equipment in North America. General Electric anticipates high-single-digit revenue growth for GE Renewable Energy in 2023.
Buoyed by the continued strength in the Aerospace segment and the resurgence of GE Vernova, General Electric has revised its full-year guidance upward. The company now expects revenue to grow in the low double digits, compared to the earlier projection of high-single-digit growth. Adjusted earnings are expected to range between $2.10 and $2.30 per share, up from the previous estimate of $1.70 to $2.00. GE anticipates an operating profit of $4.7 billion to $5.1 billion for 2023 and a free cash flow of $4.1 billion to $4.6 billion, surpassing the earlier estimates of $3.6 billion to $4.2 billion.
General Electric’s commitment to rewarding its shareholders through dividends and share buybacks remains strong. In the first half of 2023, the company distributed dividends amounting to $350 million, reflecting a 19% year-over-year increase. Additionally, GE repurchased 6.2 million shares for $0.6 million under its existing authorization during the same period.
Will General Electric’s Share Uptrend Persist?
General Electric is poised to continue its growth trajectory, driven by the momentum in its Aerospace segment, as the demand for jet engine spare parts and services soars in tandem with the resurgence in air travel. In fact, GE anticipates Aerospace revenues to surge in the high teens to 20% in 2023.
Back in March, General Electric unveiled an optimistic long-term outlook for the Aerospace segment, projecting revenue growth in the low double digits to mid-teens by 2025. For the foreseeable future, GE envisions mid-single to high-single-digit revenue expansion for the Aerospace segment, along with sustained margin improvement.
The ongoing recovery in GE Vernova’s operations is expected to further fuel GE’s growth. The recent acquisition of Greenbird Integration Technology AS, a data integration platform company, has added significant momentum to GE Vernova’s growth. This strategic purchase enhances GridOS, the first software portfolio designed for grid orchestration, by incorporating new capabilities for seamless data integration and system connectivity across the grid.
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