General Electric Company (NYSE:GE) is a multinational conglomerate based in Boston, Massachusetts. It’s involved in a variety of industries, including healthcare, aviation, and additive manufacturing. GE share price suffered over the last decade, but current CEO Lawrence Culp is on a roll bringing the company back.
GE stock is on the rise while the airlines recover, leading to the question: how high can GE stock go?
The company’s aviation unit was devastated in the first year of the pandemic. Global shutdown orders and travel restrictions slowed air traffic to a complete stop, and major carriers are pushing orders back for several years in response.
GE is also involved in the 5G revolution, and its partnership with Verizon (VZ) gives it a foothold in that industry. The company also recently sold its shares of Baker Hughes stock, which represented a 30.1 percent stake.
We run the numbers to determine if GE can generate high returns for investors.
GE Revenue Streams Are Highly Diversified
GE is a conglomerate. It has subsidiaries in a plethora of industries, like GE Healthcare, GE Aviation, GE Digital, GE Capital, GE Global Research, GE Renewable Energy, and GE Additive.
The global industrial company’s products and services include power generation, aircraft engines, oil and gas production, medical imaging, financing, and industrial products. Each category is on a growth trajectory, especially aviation and renewable energy.
GE will benefit from the return of airline traffic. The airline carriers will inevitably need to buy more engines to keep things moving, and that’s going to fuel growth for the company in the eyes of its most bullish investors and analysts.
Will top line growth enjoy a resurgence higher?
Are GE Sales Rising?
GE’s revenues trended down when travel restrictions were enacted and that translated to a hit in top line sales. The company’s total revenues of $79.61 billion are a 16 percent decrease from the 2019 haul of $95.21 billion.
That loss of revenue was mostly in aviation, although the company also dropped 6 percent in its power division revenues and 10 percent in healthcare.
The airlines picking up steam and economy reopening will help these issues. GE is expected to continue growing revenues through 2022 as the airlines pickup. Meanwhile, it’s also making cost-cutting measures to optimize operations and increase overhead.
This should help the company produce an overall profit, and it’s important to note that GE did manage to generate a return for investors, even with orders dwindling and revenues slowing. That’s in part due to CEO Culp’s commitment to cost-cutting measures.
Will GE Earnings Go Up?
GE’s earnings are on their way up. Even though the company had lower revenues in 2020 compared to the prior year, it grew profits. In fact, industrial profits of $1.80 billion in 2019 grew to $7.29 billion in 2020.
This gives the company plenty of cash on hand to spend its way through any of the issues it has to overcome in the next few years. There’s still plenty of work to do and time before the airlines fully recover.
The company did lose money on renewable energy, but it still squeezed $1.22 billion in profits from the aviation division.
And it has over $260 million in backorders that could continue picking up once airlines are back to normal traffic levels. The company is also pushing for a better accounting sheet in its healthcare and capital divisions.
These measures have some analysts wondering if the stock is undervalued.
Is GE Stock Undervalued?
GE stock has a market capitalization around $155 billion in mid-2021, and it could continue to grow. Analysts believe it will increase revenues in healthcare and aviation as the economy returns to normal. The company could potentially enjoy eye-watering gains in value over the next five years if no major shocks derail current management initiatives.
The company is well over a century old and continues to innovate with his massive footprint. Plus, GE can resume selling airplane engines once airlines increase capacity and flight frequency.
Culp’s cost-saving measures are helping the company to optimize profits and generate revenues. It has a big footprint that gives it manufacturing and distribution capabilities. The GE supply chain crosses over many verticals and allow it to pivot as necessary through mergers and acquisitions.
But things aren’t all rosy for the storied multinational conglomerate.
GE Bouncing Back After Significant Losses
There’s still plenty of challenges for GE stock. The company lost a lot of money in 2020 due to the airlines being grounded, and there’s no guarantee it will keep growing its renewable energy business. The company took hard hits from the pandemic that led to lower revenues.
And there’s still plenty of competition. Companies like Rolls Royce and Boeing (BA) are also pushing to get their companies back on track. They’re going to compete for business, and there’s no guarantee that GE will continue to grow over the next five years.
Is GE Stock Price Forecast to Rise?
GE is a multinational American conglomerate that has its hands in multiple businesses. It took a hard hit in aviation, healthcare, and renewable energy recently. The pandemic hurt the business and suppressed GE share price, but there’s still plenty of hope for the future.
As the airlines pick back up, GE will continue growing with them. And the company’s 0.30 percent dividend adds an enticement for anyone seeking a growth opportunity with liquidity.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.