NEW YORK - GE Aerospace, a leader in aerospace propulsion, services, and systems, is preparing to operate independently and will begin trading on the New York Stock Exchange under the ticker "GE" on April 2, 2024. In anticipation of this move, the company hosted its 2024 Investor Day today, where CEO H. Lawrence Culp, Jr. outlined the company's strategic vision and financial targets.
The company reaffirmed its 2024 financial guidance and provided a longer-term outlook, aiming for approximately $10 billion in operating profit by 2028. This target is supported by a forecasted high-single-digit compound annual growth rate (CAGR) from 2025 to 2028. Additionally, GE Aerospace expects to grow its adjusted revenue by low-double-digits in 2024 and 2025. Operating profit is projected to reach between $6.0 billion and $6.5 billion in 2024, and between $7.1 billion and $7.5 billion in 2025.
Free cash flow, which is a key indicator of financial health and efficiency, is anticipated to surpass $5 billion in 2024, with a conversion rate of more than 100% from adjusted net income. The company plans to maintain this level of free cash flow conversion through 2028.
In terms of capital allocation, GE Aerospace intends to invest in growth and innovation, including research and development (R&D) and capital expenditures. The company also plans to return approximately 70-75% of available funds to shareholders through dividends and share buy-backs. Specifically, an initial dividend payout is expected at 30% of net income, subject to board approval, and a $15 billion share buy-back authorization has been announced.
The leadership team highlighted the company's large and growing installed base, balanced commercial portfolio, and position as the preferred provider of rotorcraft and combat engines. These strengths, coupled with investments in next-generation technology, position GE Aerospace to deliver significant value.
This financial outlook and capital allocation framework are underpinned by a strong, investment-grade balance sheet, which includes available cash from free cash flow, future monetization of assets, and a pro forma cash balance of $13 billion post-spin.
The information for this article is based on a press release statement.
InvestingPro Insights
As GE Aerospace gears up for its new journey as an independent entity, the latest data from InvestingPro provides a deeper understanding of the company's financial position and market performance. With a robust market capitalization of $173.59 billion, GE stands as a formidable player in the aerospace sector. The company's Price/Earnings (P/E) ratio, a key indicator of market expectations about the company's earnings growth, stands at 18.89, reflecting investor sentiment and the company's profitability potential.
InvestingPro Tips highlight that GE's stock is currently in overbought territory according to the Relative Strength Index (RSI), suggesting that caution may be warranted for potential investors. Additionally, the stock's low price volatility indicates that it has been relatively stable, which could appeal to investors seeking less risk in their portfolio.
Despite the overall positive outlook, it's important to note that analysts have revised their earnings expectations downwards for the upcoming period. This could be a point of consideration for investors as they evaluate GE's future performance, especially in the context of the company's strategic vision and financial targets presented during the 2024 Investor Day.
For a comprehensive analysis of GE's financial health and stock performance, including additional InvestingPro Tips such as the company's dividend history and debt levels, visit https://www.investing.com/pro/GE. And remember, with the exclusive coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more insights. There are 15 additional InvestingPro Tips listed for GE on InvestingPro, offering a wealth of information for those looking to make informed investment decisions.
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