Is General Electric Co. (GE) the Top Industrial Pick of The Week For Investors?

General Electric Company (GE) has reported a solid performance for the second quarter, with significant growth in both orders and revenue despite an unpredictable macroeconomic climate. This growth is attributed to substantial service expansions across all its portfolio lines, heightened demand within GE Aerospace, and record Renewable Energy orders.

GE’s shares have seen an impressive surge of 69.8% year-to-date and are currently trading above its 50-day and 200-day moving averages of $110.56 and $91.20, respectively. Owing to its strong position as an industry leader, sustained technological advancements, and consistent demand, there remains potential for further growth to complement GE’s robust share price trajectory.

GE outpaced Street revenue and EPS estimates by 10.2% and 48.1% for the second quarter, respectively. Also, the company raised its full-year guidance as it expects continued strength.

The company now forecasts organic revenue growth to enter low-double digits, a marked increase from the previously anticipated high single digits. Meanwhile, its adjusted EPS is expected to come in at $2.10 - $2.30, a rise from the initially projected range of $1.70 - $2.00.

A detailed examination of the company’s key financial metrics and trends is warranted to understand why GE’s stock may be a worthwhile addition to your portfolio.

Analyzing the Financial Health of General Electric: A Comprehensive Three-year Examination (2020-2023)

The data series depicts a fluctuating trend in the trailing-12-month net income of GE from the third quarter of 2020 through the second quarter of 2023. Key observations:

• From the third quarter of 2020 to the fourth quarter of 2020, GE’s net income showed a considerable increase from $3.8 billion to $5.7 billion.
• A significant decrease marked the year 2021. Starting from the first quarter with a net income of -$2.3 billion, this downward trend persisted throughout the year, concluding at -$6.52 billion in the fourth quarter.
• The negative trajectory continued into the first three quarters of 2022, with respective net incomes of -$4.76 billion, -$4.42 billion, and -$5.84 billion. However, the fourth quarter displayed a shift in this trend as the net income rose to $225 million.
• This positive shift amplified through the first half of 2023, resulting in considerable earnings of $8.77 billion and $9.6 billion during the first and second quarters, respectively.

In calculating the growth rate from the first value to the last value within this series, there’s an exponential rise from $3.8 billion as of September 30, 2020, to $9.6 billion as of June 30, 2023. Despite the fluctuating trends, GE’s recent financial performance, as indicated by the net income reports from 2023, shows a promising upward movement.

The ROA of GE has demonstrated a volatile trajectory from September 2020 through June 2023.

• In September 2020, the ROA stood at 0.013 before rising to reach 0.02 by December 2020.
• The first quarter of 2021 marked the beginning of a downturn, with the ROA dipping into negative territory (-0.015). The subsequent decline lasted through 2021 and much of 2022, reaching its lowest point by September 2022 (-0.032).
• There was a slight reprieve at the end of 2022 when the company reported a ROA of zero.
• Commencing from the first quarter of 2023, GE’s ROA rebounded sharply and continued to rise, reporting a net positive ROA of 0.047 in March 2023 and peaking at 0.053 in June 2023.

This trend shows a major transformation of GE’s financial health over the reviewed period. The increase in ROA from an initial 0.013 to an ultimate 0.053 translates to a growth rate of approximately 307%.

The Asset Turnover of GE has exhibited a gradual yet consistent upward trend over the report’s duration.

2020: GE started with an Asset Turnover of 0.28 as of September 30 and ended the year at 0.31 on December 31, reflecting a growth trend in its efficiency of generating revenue from assets.

2021: There was slight fluctuation with a dip to 0.30 in March, but the Asset Turnover rose again to 0.31 by mid-year on June 30. By the close of 2021, it had improved slightly to 0.32.

2022: The positive trend became more apparent in 2022 with significant quarterly improvements. From 0.34 in March, Asset Turnover grew to 0.37 by mid-year and increased notably to 0.40 in September, ending the year at 0.41.

2023: In 2023, although the data only reaches mid-year, there is slow but steady growth.

Over the series period, Asset Turnover has grown approximately 46%. The data suggests that GE has effectively leveraged its assets to generate revenue.

GE’s Analyst Price Target experienced several fluctuations from November 2021 to August 2023. Overview:

• The starting value was $108 in November 2021 and showed an upward trend, reaching $126.625 towards the end of November 2021.
• The price then slightly declined and plateaued around $123.5 from December 2021 to January 2022.
• Following this period, the price target slowly decreased to $108.5 by June 2022. A significant drop occurred in July 2022, reaching $84.
• This was followed by a phase of relative stability between August 2022 and October 2022, with a minor uptick to $85.5, which declined again to $82 in late October 2022.
• A sharp rise was seen in November 2022 to reach $87. This trend continued until December 2022, peaking at $95.
• At the beginning of 2023, the value declined again to around $83.5, followed by a slight increase and stabilization at $87 from February to early March 2023.
• However, the price target rapidly climbed to $92.6 in mid-March and peaked at $109.5 by May 2023, maintaining this plateau until June 2023.

Recent Data Summary:

• In the recent weeks from June to August 2023, the Analyst Price Target remained relatively stable, fluctuating slightly between $108.5 and $110 from late June to late July 2023.
• A noticeable surge occurred in August 2023, with the price spiking to $127.5 by mid-August 2023.

Growth Rate: Calculating the growth rate based on the last value from the first value shows that the Analyst Price Target increased by 18% over the course of this data series.

Analyzing General Electric’s Resilient Stock Growth Trajectory Throughout 2023

The share price of GE, from the data provided, has shown consistent growth over the reviewed period:

• The price started at $85.00 on March 3, 2023, and rose to $89.14 by March 10, 2023.
• It continued its upward trend throughout March, reaching $93.92 by month-end.

In April, the growth rate accelerated:

• The price started at $95.05 on April 6, 2023.
• Decreased slightly to $94.42 on April 14 but picked up momentum and climbed to $98.54 by April 28, 2023.

May saw a sharper increase:

• Starting the month at $100.78 on May 5 and bouncing back to $102.49 by the end of the month.

In June:

• The trend continued, with prices beginning at $103.31 and ending at $106.62 by the end of the month.

July to August witnessed an even stronger growth and some fluctuations:

• Beginning July at $108.08 and peaking at $114.44 by July 28, 2023.
• In August, the overall growth decelerated, with prices initially climbing to $113.92, then decreasing slightly to end at $112.12 by August 24, 2023.

In summary, the share prices of GE showed consistent growth through the data-reviewed period. The initial growth rate seemed to accelerate from March through May and then moderated a bit from June through August. Despite this slight slowdown, the overall trend continued upward. Here is a chart of GE’s price over the past 180 days.

Analyzing Key Dimensions of General Electric’s POWR Ratings: Momentum, Sentiment, and Value

GE has an overall B rating, translating to a Buy in our POWR Ratings system. It is ranked #11 out of the 35 stocks in the  Industrial - Manufacturing category.

The POWR grade helps indicate a stock's overall health and potential success based on numerous factors.

When reviewing the POWR Ratings for GE, it is clear that three dimensions consistently remain significant throughout, showing either high ratings or distinct trends. These key dimensions are Momentum, Sentiment, and Value.

Momentum

• On February 28, 2023, this measure stood at 75.
• The momentum rating showed a consistent upward trend over the following months, with slight increments: 78 in March 2023, 81 in April 2023, and a notable jump to 90 by May 2023.
• Hitting a peak of 94 in June 2023, the momentum slightly falls to 92 by July 2023, which seems to have sustained around the high 80s even into August 2023 when it recorded 88.

Sentiment

• In February 2023, sentiment registered a rating of 57, which climbed to 69 in March 2023.
• April 2023 saw a significant increase in sentiment as it reached a score of 81, continuing its rapid rise to 92 in May 2023.
• Although the Sentiment rating dropped to 88 in June 2023, it quickly rebounded, reaching its highest value of 93 in July 2023 before moderating to 89 in August 2023.

Value

• The Value dimension started at a position of strength in February 2023, scoring 75.
• Despite a small dip to 70 in March 2023, it rebounded to 75 in April 2023.
• From May 2023 to July 2023, GE’s value remained unchanged at an impressive rating of 83.
• By August 2023, although slightly reduced, it remained high at 79.

In conclusion, Momentum and Sentiment showed a strong upward trend through most of the period analyzed, while Value, despite minor fluctuations, maintained a relatively high rating.

How does General Electric Company (GE) Stack Up Against its Peers?

Other stocks in the Industrial - Manufacturing sector that may be worth considering are Core Molding Technologies Inc (CMT), Vishay Precision Group Inc. (VPG), and Siemens AG (SIEGY) -- they have better POWR Ratings.

What To Do Next?

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GE shares were unchanged in premarket trading Friday. Year-to-date, GE has gained 70.91%, versus a 15.10% rise in the benchmark S&P 500 index during the same period.

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.

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