Insights

• GE Aerospace is a profitable company with a strong track record of generating cash flow.
• The company's profitability is improving, driven by cost control and operational efficiencies.
• The company's liquidity position is generally strong, but it may be facing some challenges in managing its short-term liquidity.
• The company's long-term solvency is strong, as evidenced by its decreasing debt levels and increasing levels of total capital.
• The company's focus on long-term growth and its disciplined capital allocation strategy are strengths.
• The company faces significant risks from macroeconomic volatility, supply chain challenges, and the cyclical nature of the commercial aviation industry.
• The company's future outlook is positive, driven by its strong profitability, its focus on operational efficiency, and its commitment to returning capital to shareholders.

Analysis

• Revenue - GE Aerospace's revenue has been declining in recent quarters, which is likely due to factors such as supply chain constraints, inflation, and changes in customer demand. - The company's revenue growth has been decelerating over the past 5 years, with a 5-year CAGR of -15.41%. - Despite the recent revenue decline, the company's revenue is still significantly higher than the industry average. - The company's management has highlighted the impact of supply chain constraints on its revenue performance. - The company's forward guidance suggests that it expects to continue to grow revenue in the future, driven by strong demand in both commercial and defense sectors.
  • Profitability
    • GE Aerospace's profitability has been improving in recent quarters, as evidenced by the increasing gross margin, operating margin, and net margin.
    • The company's profitability is significantly higher than the industry average, as evidenced by its ROA, ROE, ROTC, and ROIC.
    • The company's focus on operational efficiency and cost management is driving its profitability improvement.
    • The company's strategic initiatives, such as the implementation of FLIGHT DECK and the formation of a new Technology & Operations organization, are expected to further enhance its operational efficiency and profitability.
  • Liquidity
    • GE Aerospace's liquidity position is generally strong, as evidenced by the decreasing levels of short-term debt and the increasing levels of cash and short-term investments.
    • However, the decreasing levels of working capital and the decreasing current ratio suggest that the company may be facing some challenges in managing its short-term liquidity.
    • The company's management has highlighted the impact of supply chain constraints on its working capital performance.
    • The company's strong cash flow generation provides it with ample financial flexibility for future investments or economic downturns.
  • Solvency
    • GE Aerospace's long-term solvency is strong, as evidenced by the decreasing levels of long-term debt and the increasing levels of total capital.
    • The company's debt / EBITDA ratio is also below the industry average, indicating that it is not overly leveraged.
    • The company's focus on reducing debt levels and increasing investments in long-term assets suggests that it is confident in its ability to generate cash flow and support its long-term growth.
  • Operational Efficiency
    • GE Aerospace appears to be using its assets more efficiently, as evidenced by the decreasing levels of assets and the increasing levels of profitability.
    • The company's focus on operational efficiency and cost management is driving its profitability improvement.
    • The company's strategic initiatives, such as the implementation of FLIGHT DECK and the formation of a new Technology & Operations organization, are expected to further enhance its operational efficiency and profitability.
  • Cash Flow Analysis
    • GE Aerospace's cash flow from operating activities is generally increasing, driven by strong net income growth and a focus on cost management.
    • The company's free cash flow is increasing, providing it with ample financial flexibility for future investments, debt repayment, and shareholder returns.
    • The company's cash flow / total debt ratio is above the industry average, indicating strong debt service coverage.
    • The company's free cash flow margin is increasing, indicating that it is generating more cash flow from its operations.
  • Risk Factors
    • The company faces significant operational and financial risks from macroeconomic volatility, supply chain challenges, and the cyclical nature of the commercial aviation industry.
    • The company's management has highlighted the impact of supply chain constraints on its financial performance.
    • The company's decreasing levels of working capital and the decreasing current ratio suggest that it may be facing some challenges in managing its short-term liquidity.
    • The company's decreasing levels of equity could also be a concern, as it could indicate that the company is not generating enough profits to support its growth.
  • Future Outlook
    • GE Aerospace's future outlook is positive, driven by its strong profitability, its focus on operational efficiency, and its commitment to returning capital to shareholders.
    • The company's forward guidance suggests that it expects to continue to grow revenue and improve profitability in the future.
    • The company's strategic initiatives, such as the implementation of FLIGHT DECK and the formation of a new Technology & Operations organization, are expected to further enhance its operational efficiency and profitability.
    • The company's strong cash flow generation provides it with ample financial flexibility for future investments or economic downturns.

Benchmarks (as of 2025-04-09)

• Performance Comparison:

  • GE Aerospace has significantly outperformed the Technology Select Sector SPDR Fund (XLK) over the 1-year, 2-year, and 3-year periods. For example, over the past three years, GE Aerospace has returned 247.21% compared to XLK's 40.71%. However, in the most recent week and month, GE has underperformed XLK. Year-to-date and 3-month performance shows GE outperforming XLK.
  • GE's performance relative to XLK has been inconsistent, with periods of significant outperformance followed by short-term underperformance.

• Risk and Return Analysis:

  • GE Aerospace has provided higher annualized returns compared to the Technology Select Sector SPDR Fund (XLK) over the 1-year, 2-year, and 3-year periods. For example, the 3-year annualized return for GE is 51.42% compared to 12.06% for XLK.
  • GE Aerospace has generally exhibited similar or slightly higher annualized volatility compared to the Technology Select Sector SPDR Fund (XLK).
  • GE Aerospace's maximum drawdown of -46.55% is greater than XLK's maximum drawdown of -33.56%, indicating a higher risk profile.

• Risk-Adjusted Performance:

  • GE Aerospace's Sharpe Ratio was frequently higher than that of the Technology Select Sector SPDR Fund (XLK), indicating better risk-adjusted returns.
  • GE Aerospace's Beta fluctuated around 1, indicating it generally moves in line with the market, while XLK consistently had a Beta above 1, indicating it is more volatile than the market.

• Overall Assessment:

  • GE Aerospace has demonstrated superior historical performance and risk-adjusted returns compared to the Technology Select Sector SPDR Fund (XLK). However, GE also exhibits higher volatility and drawdown, suggesting a higher risk profile.
  • Recent trends indicate that GE's performance has been mixed, with short-term underperformance relative to XLK.
  • Investors should consider their risk tolerance and investment horizon when evaluating GE Aerospace relative to Technology Select Sector SPDR Fund (XLK).

Peers Price History(as of 2025-04-09)

• Performance Comparison:

  • GE Aerospace has shown significant outperformance compared to Lockheed Martin and RTX Corp. over the 2-year and 3-year periods, with returns of 150.57% and 247.21% respectively, versus -1.82% and 7.75% for Lockheed Martin, and 35.35% and 35.14% for RTX Corp. However, over the past year, GE Aerospace's performance of 20.59% has underperformed RTX Corp's 29.49%, while outperforming Lockheed Martin's 5.01%. Year-to-date, GE Aerospace and RTX Corp. are nearly identical at 11.29% and 11.27% respectively, while Lockheed Martin is significantly lower at -3.44%.

• Risk and Return Analysis:

  • GE Aerospace has provided higher annualized returns over the 2-year and 3-year periods compared to Lockheed Martin and RTX Corp. For example, the 3-year annualized return for GE Aerospace is 51.42%, compared to 2.52% for Lockheed Martin and 10.56% for RTX Corp.
  • GE Aerospace has generally exhibited moderate volatility, with annualized volatility ranging from approximately 14.89% to 55.78%. Lockheed Martin has generally had lower volatility, ranging from approximately 8.88% to 39.66%. RTX Corp.'s volatility has ranged from approximately 8.53% to 41.34%.
  • GE Aerospace experienced a maximum drawdown of -46.55% on 2022-07-14, which is larger than the maximum drawdowns of Lockheed Martin (-30.71% on 2025-02-14) and RTX Corp. (-32.84% on 2023-10-05). This indicates that GE Aerospace has historically been subject to more significant declines from peak values.

• Risk-Adjusted Performance:

  • GE Aerospace's Sharpe Ratios were generally higher than those of Lockheed Martin and RTX Corp. from Q2 2023 through Q1 2024, indicating better risk-adjusted returns during that period. However, Lockheed Martin had higher Sharpe Ratios in Q2 2022 and Q4 2022.
  • GE Aerospace's beta has generally been around 1, indicating that it moves relatively in line with the market. Lockheed Martin's beta has consistently been below 1, indicating lower sensitivity to market movements. RTX Corp.'s beta has also been below 1, but generally higher than Lockheed Martin's.

• Overall Assessment:

  • GE Aerospace has demonstrated strong historical performance, particularly over the 2-year and 3-year periods, with higher annualized returns compared to Lockheed Martin and RTX Corp. However, it has also exhibited higher volatility and a larger maximum drawdown, indicating a higher risk profile. GE Aerospace's Sharpe Ratios suggest better risk-adjusted returns during certain periods, but its beta around 1 indicates market-level sensitivity. Lockheed Martin has shown lower volatility and a lower beta, suggesting a more conservative risk profile, but its returns have generally been lower. RTX Corp. has provided competitive returns, but its volatility and drawdown characteristics are closer to those of GE Aerospace.
  • Recent trends indicate that GE Aerospace and RTX Corp. experienced a spike in volatility in Q2 2025, while Lockheed Martin's volatility remained moderate. This suggests that recent market conditions may be having a greater impact on GE Aerospace and RTX Corp. than on Lockheed Martin.

Peers Fundamentals(as of 2024-12-31)

1. Market Position and Size:

   • GE Aerospace (GE) is the largest company in the peer group, with a market capitalization significantly larger than Lockheed Martin Corp. (LMT) and RTX Corp. (RTX). This indicates a larger scale of operations and potentially greater market influence.
   • However, GE's size may be a factor in its lower returns on assets and equity compared to LMT, suggesting that maintaining high returns with a larger asset base can be challenging.

2. Profitability and Efficiency:

   • GE exhibits significantly higher gross profit margin, EBITDA margin, and net profit margin compared to both peers and the industry average, indicating efficient operations and a strong competitive position.
   • However, GE's lower return on assets and equity compared to LMT suggests that it may be less efficient in generating returns from its assets and equity, potentially due to its larger size.

3. Financial Health and Stability:

   • GE has a strong financial health profile, characterized by high profitability, a conservative debt position, and a solid cash flow generation capacity.
   • However, its lower liquidity ratios compared to both peers and the industry average suggest a potential vulnerability to short-term financial stress.

4. Valuation and Market Perception:

   • The market is willing to pay a premium for GE's revenue and profitability, as evidenced by its higher EV/Sales and EV/EBITDA ratios compared to its peers.
   • However, the market may be less confident in GE's future earnings growth or asset quality, as its P/E and P/B ratios are lower than its peers.

5. Cash Flow and Capital Management:

   • GE generates lower NOCF and FCF than its peers, but its lower CAPEX suggests a more conservative investment strategy, potentially leading to a more sustainable cash flow generation in the long term.
   • It's important to consider the sustainability of GE's cash flow generation and its impact on future growth and shareholder value.

6. Growth and Future Prospects:

   • GE's growth rates are lower than the peer group average, suggesting potential challenges in maintaining its competitive position and expanding its market share.
   • However, GE's recent growth acceleration, as evidenced by its higher 3-year CAGRs for EBITDA, free cash flow, and EBIT margin compared to its 5-year CAGRs, suggests potential for improvement.

7. Potential for Investment:

   • GE presents a mixed investment proposition. Its strong profitability, conservative debt position, and solid cash flow generation capacity are attractive.
   • However, its lower growth rates and liquidity ratios compared to its peers raise concerns about its future prospects and ability to manage short-term financial obligations.

8. Key Risks and Considerations:

   • GE's lower growth rates and liquidity ratios compared to its peers suggest potential challenges in maintaining its market share and managing short-term financial obligations.
   • The sustainability of GE's recent growth acceleration needs to be carefully assessed.

9. Overall Assessment:

   • GE Aerospace (GE) is a large, profitable, and financially stable company with a strong competitive position. However, its lower growth rates and liquidity ratios compared to its peers raise concerns about its future prospects and ability to manage short-term financial obligations. Investors should carefully consider these factors and assess the sustainability of GE's recent growth acceleration before making any investment decisions.