By Ben Levisohn
It's a great time to be an industrial stock, and the children of the former General Electric have been a big part of the sector's gains. That shouldn't change in the months ahead.
Once-boring industrial stocks don't look so stodgy anymore. The Industrial Select Sector SPDR exchange-traded fund has gained 15% this year, outpacing the Technology Select Sector SPDR ETF by a full three percentage points and more than double the S&P 500's 7.1% rise.
The former GEs should get no small amount of credit for the industrial strength of the industrial sector. GE Aerospace, the ETF's largest holding, and GE Vernova, its sixth-largest, have gained 53% and 73%, respectively, making them the second- and third-best performers in the fund this year. Even GE Aerospace's 2.2% decline after it released earnings this past Thursday couldn't do much to derail the stock's bullish narrative.
There was nothing wrong with the numbers. Earnings and sales beat analyst forecasts, while management raised its guidance, not just for 2025 but for the long term as well. The company now expects an operating profit of $11.5 billion in 2028, up from its previous forecast for $10 billion. The decline was likely a "sell the news" reaction for a stock that had outperformed and, at 41 times 12-month forward earnings, is no longer cheap.
"In our view, GE's 2Q and other results over the last year or so also show how powerful the aero engine business model can be when everything comes together," says Vertical Research Partners analyst Robert Stallard, who has a $300 price target on the stock, which recently traded at $267.49. "While we are not anticipating further material re-rating from here, we think GE can still outperform."
GE Vernova has done even better. Unlike GE Aerospace, the company, which makes turbines for gas generators, is an artifical-intelligence play, and its gains reflect it. Vernova reports earnings on July 23, and Wall Street is expecting good things from it as well. Two analysts -- J.P. Morgan's Mark Strouse and BofA Securities' Andrew Obin -- raised their price targets this past week, citing growing backlogs and the positive demand comments management is likely to deliver following the release.
The news flow certainly suggests increased demand in the future, according to Seaport Research Partners analyst Tom Curran, who has a $630 price target on the stock, which recently traded at $576.63. He cites Meta Platforms' recently announced plans for massive data centers that will require enormous amounts of power -- and Georgia Power's plan to invest in energy production, which was approved by the state -- as a "direct reinforcement of our [GE Vernova] bull case."
The strength of the two stocks is amazing considering how much skepticism existed when GE CEO Larry Culp, now the head of GE Aerospace, announced plans to break up the company. Barron's Al Root recommended holding all three pieces, and it turned out to be a great call, even if the final piece, GE HealthCare Technologies, hasn't delivered the same kind of excitement.
That may be because of its size -- it's worth just $35 billion to Aerospace's $278 billion and Vernova's $156 billion. Or it could be a lack of market dominance. While GE makes the engines for a large chunk of commercial jets, and Vernova likely has a 30%-40% share of the gas turbine market, GE HealthCare is a midsize player in an out-of-favor sector.
But second-quarter earnings could still contain some positive surprises, notes Mizuho Securities analyst Anthony Petrone. "Although the 'Big Beautiful Bill' Medicaid implications are driving some early concern, U.S. hospital-based capital budget checks indicate the 2Q trends remain robust," he explains. Petrone has a $90 price target on GE HealthCare stock, up 19% from a recent $75.90.
Seems like it might be a good time to play the GE trifecta.
Write to Ben Levisohn at ben.levisohn@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
July 18, 2025 13:38 ET (17:38 GMT)
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