General Electric (GE) stock is on track to achieve its highest close in over five years, presenting an intriguing puzzle for market analysts. In midday trading on Thursday, GE shares were valued at $118.46, marking a 1.9% increase. In contrast, the S&P 500 and the Dow Jones Industrial Average experienced slight declines of 0.1% and 0.4%, respectively. If GE stock remains at this level, it will be the highest closing price for shares since November 10, 2017, when they reached $122.96, as reported by Dow Jones Market Data. Notably, this milestone would also mark the stock's first close above its 200-month moving average since that noteworthy year.
GE has enjoyed a remarkably successful month and an even more outstanding year overall. In November alone, shares have surged by 8.5%, contributing significantly to an impressive 80% rally since the beginning of 2023. Based on historical data dating back to 1972, this exceptional performance positions GE for its best year on record.
The ongoing Dubai Air Show could be partially responsible for this upward trajectory. As Boeing (BA) and Airbus (AIR.France) continue to secure new orders, Boeing's in-demand twin-aisle jets seem particularly popular among buyers. GE plays a significant role in producing a substantial number of these aircraft. Furthermore, the company manufactures both twin-aisle and single-aisle engines for both Boeing and Airbus.
Additionally, GE shareholders may be benefiting from the struggles faced by their competitors, accentuating the comparative strength of GE's position in the market. One notable example is RTX (formerly Raytheon Technologies), which encountered issues with its geared turbofan jet engine. Furthermore, Siemens Energy's wind business, Siemens Gamesa, has attracted concerns due to technical difficulties with its turbines, which have consequently impacted the company's valuation.
GE's Wind Business and Recent Challenges
The wind business has posed challenges for GE, with uncertain government policies, high offshore wind costs, and inflation impacting the company for years. In the third quarter, GE's wind unit experienced a loss of $317 million, which is an improvement compared to the $934 million lost in the same quarter last year.
Ironically, GE has found some benefits in the face of these challenges. Danish renewable-energy company Orsted recently canceled two offshore wind projects off the coast of New Jersey, which included some of GE's backlog. While losing backlog is not ideal, it is considered acceptable if it prevents the business from losing money.
According to Melius analyst Scott Davis, GE shares might also be benefiting from being the "best house in a bad neighborhood." The industrial economy has been shrinking, with the ISM PMI consistently below 50 for a year, indicating a lack of growth. However, GE has seen some growth in its aerospace business due to increased demand for air travel following the pandemic.
BofA Securities analyst Andrew Obin has written positively about GE's strong organic growth compared to other industrial companies, particularly due to robust aerospace end markets. He rates GE shares as a Buy with a $135 price target.
Melius' aerospace analyst Robert Spingarn now covers GE shares and also rates them as a Buy with a $134 price target.
Currently, approximately 61% of analysts covering the company rate GE shares as a Buy, slightly higher than the average Buy-rating ratio for stocks in the S&P 500, which is about 55%. The average analyst price target for GE shares is approximately $133.
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