Yahoo Finance Key Reasons to Hold on to General Electric (GE) Stock Now
General Electric GE is gaining from multiple tailwinds despite supply-chain challenges in the defense market and raw material cost inflation.
Strength in the Aerospace segment due to continued recovery in the commercial market is a key catalyst for General Electric’s growth. Robust consumer demand is driving orders in the segment. Substantial LEAP engine deliveries and shop visit growth drove orders and revenues in the segment. While orders climbed 14% in the first quarter of 2023, revenues increased 25%.
After months of softness, a rebound in demand at the Power segment augurs well for this Zacks Rank #3 (Hold) company. Strength in GE Gas Power heavy-duty gas turbine transactional services and aero derivatives is aiding the Power segment. The company expects low single-digit revenue growth for the Power segment in 2023 driven by Gas Power services. The acquisition of Nexus Controls (April 2023), which allows the creation of a single, full-service controls business line for further development of GE’s proprietary Mark Vle controls systems platform, should bolster the segment’s growth. The acquisition is aligned with GE’s commitment to invest in leading controls technology and expertise to enhance customer experience.
Despite weaknesses due to lower onshore wind deliveries and other factors, the Renewable Energy segment has lately been showing signs of progress, thanks to higher equipment demand at Grid and Onshore Wind in North America.
With market demand remaining strong, General Electric’s raised earnings and free cash flow guidance for 2023 holds promise. The company now expects adjusted earnings of $1.70-$2.00 per share compared with $1.60-$2.00 anticipated earlier. It expects a free cash flow of $3.6-$4.2 billion for 2023 compared with $3.4-$4.2 billion estimated earlier. The company continues to expect high-single-digit revenue growth for the current year.
General Electric’s commitment to rewarding its shareholders through dividends and share buybacks is noteworthy. In March 2022, the company’s board of directors authorized the share repurchase program of up to $3 billion. GE bought back approximately 13 million shares for $1 billion in 2022 under this authorization. In 2022, the company paid out dividends worth $639 million to shareholders, up 11.1% year over year. In the first quarter of 2023, the company paid dividends of $203 million and repurchased 3.2 million shares for $0.3 billion.
Amid these positives, shares of General Electric have rallied 21% in the year-to-date period against the industry’s 7.3% decline.
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The Zacks Consensus Estimate for GE’s 2023 earnings has been revised upward by 3% in the past 60 days.
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ABB Ltd ABB presently carries a Zacks Rank #2 (Buy). The company pulled off a trailing four-quarter earnings surprise of 8%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks.
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Allegion plc ALLE presently carries a Zacks Rank #2. The company delivered a trailing four-quarter earnings surprise of 12.5%, on average.
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