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Is Ge Aerospace A Millionaire-maker Stock?
A lot has changed at General Electric, or what remains of the company, which is now known as GE Aerospace (NYSE: GE). In fact, 2024 was its first year after a dramatic company overhaul.
There are very positive things going on here, and they haven't gone unnoticed. Which sets up the tough question of whether or not GE Aerospace is a millionaire-maker stock.
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The breakup of General Electric
The problems at General Electric came to the fore during the Great Recession, between 2007 and 2009. Back then, the company was a sprawling conglomerate with operations in the industrial, media, and finance sectors.
It was the finance sector that was the company's undoing. A government bailout, a dividend cut, and years upon years of effort to get GE back on its feet all led up to what amounted to the ultimate breakup of the company.
Image source: Getty Images.
In fact, it required bringing in an outsider to finish the job. Historically, GE promoted from within, but internal leaders just weren't getting the job done this time around.
The final move, made by Larry Culp, was to break GE into three businesses: GE Verona, GE Healthcare, and GE Aerospace. The GE ticker was kept by GE Aerospace, which effectively owns what remained after all of the changes that were made at the company. Some might view it as something of a sad ending to a once-iconic conglomerate.
That said, GE Aerospace is a pretty attractive company. Notably, Culp chose to remain the CEO of this business, which hints that he liked it best of all among the former GE's operations. The first year as a stand-alone company shows why.
GE Aerospace is flying high
To quickly summarize 2024, GE Aerospace saw orders increase 32% year over year with revenue up 9%. Adjusted earnings, which take out one-time items (a big issue in what amounted to a transition year), rose 56%.
And, thanks to the impressive order flow, Culp happily announced that his company expects double-digit growth in revenue and earnings per share in 2025. The longer-term trajectory is likely to be strong, too, as more and more people around the world begin to travel via airlines thanks to rising living standards.
This is all good news for investors who owned the stock in 2024, noting that the share price has risen well over 80% over the past year. For comparison, the S&P 500 index is up around 25% over the same span. However, the really important comparison is more likely the 38% gain of the SPDR S&P Aerospace & Defense ETF . Clearly, investors saw what was going on at GE Aerospace and priced in that good news very quickly.
At this point, the stock has moved very far very fast. That's highlighted by the price-to-earnings ratio (P/E) of 32 versus the average for the SPDR S&P Aerospace & Defense ETF of around 27. GE Aerospace is an attractive company with a strong and growing business, but it also appears to be a relatively expensive stock.
This millionaire maker could take time some
This is where a tough choice has to be made. If you buy GE Aerospace today hoping that it will continue to rocket higher and make you an overnight millionaire, there is a reasonable risk that you'll be let down. There is so much good news priced into the stock that GE Aerospace can't afford to slip up.
However, if you think in decades and not days, what remains of the old GE appears very well positioned for long-term growth.
It just might be a bumpy flight in the near term as Wall Street's early excitement about the stock ebbs and flows. So, yes, GE Aerospace could be a millionaire maker over a long enough period and with a sufficient upfront investment, but it is highly likely that it is ongoing business growth that gets it there. That story has to play out over the years ahead, which means only long-term investors will probably want to jump aboard what appears to be a rather expensive stock today.
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends GE HealthCare Technologies. The Motley Fool recommends GE Aerospace. The Motley Fool has a disclosure policy.
