On Wednesday, CFRA raised its rating on GE Aerospace (NYSE: GE) from Hold to Buy, adjusting the stock price target to $181 from $167. The new stock target represents a $14 increase and is based on a 31.5 times multiple of the projected earnings per share (EPS) for 2025, which is above the average for peers in the commercial aerospace sector.
The firm's revised outlook is fueled by a growing confidence in the aftermarket demand for aerospace over the next few years. GE Aerospace, with its significant market presence, is expected to benefit from this anticipated demand surge. The analyst maintained the EPS forecasts for 2024 and 2025 at $4.00 and $5.75, respectively.
The upgrade comes amid a backdrop of ongoing challenges in the aerospace industry. Notably, Boeing's (NYSE: NYSE:BA) April deliveries fell short of expectations, with only 24 commercial aircraft delivered, including just 16 of the 737 MAX narrow-body planes. This figure is significantly below the Federal Aviation Administration's (FAA) mandated cap of 38 units for the MAX model.
This continued underperformance by Boeing is seen as a potential boon for GE Aerospace's aftermarket business. As the commercial aircraft fleet ages, the demand for replacement parts is expected to rise. The analyst suggests that approximately 75% of the current fleet may need to be replaced over the next two decades, with the bulk of replacements likely occurring later in that period.
InvestingPro Insights
As CFRA upgrades GE Aerospace's rating to Buy with a higher price target, real-time data from InvestingPro aligns with their positive outlook. GE's market capitalization stands strong at $175.63 billion, reflecting its substantial presence in the aerospace industry.
The company's forward-looking P/E ratio is 19.02, indicating investor confidence in its future earnings potential. Notably, GE has experienced robust revenue growth over the last twelve months, with an increase of almost 17%, signaling a healthy expansion in its business operations.
InvestingPro Tips suggest that while analysts anticipate a sales decline in the current year, they have also revised their earnings upwards for the upcoming period. This mixed view is complemented by GE's status as a prominent player in the Aerospace & Defense industry.
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