Investors can't seem to look past the Middle East, but GE's core business continues to grow. Investors can't seem to look past the Middle East, but the company's core business continues to grow. The stock looks like a buy. By Al Root
Stock market corrections are painful. They can also be healthy, checking overly exuberant investor enthusiasm and ensuring some risks are reflected in stock prices. Corrections can also be buying opportunities. Investors should use the recent selloff in aerospace stocks to snap up shares of an industry leader: GE Aerospace.
GE Aerospace (don't call it General Electric) stock has been unfairly punished since its first-quarter earnings report, with investors' gaze now narrowly focused on the Middle East rather than on a horizon filled with more planes powered by GE's aircraft engines. While that is understandable, it's also unfair to GE's prospects as a business. The stock can hit $350, up 15% from recent levels.
Problems started for GE Aerospace stock in March, right after missiles started flying in Iran. Between the start of the war and the company's first-quarter earnings report, shares declined 11% as investors worried about high oil prices affecting travel demand. GE quantified those fears on April 21 when it reported better-than-expected earnings and left its 2026 earnings guidance unchanged, which calls for about 15% earnings growth. Not a bad result.
Unfortunately, the company also revised its global air-travel growth expectations from mid-single digits to flat to low-single digits. That's all it took to send shares down almost 6%.
"No good deed goes unpunished," wrote Vertical Research Partners analyst Rob Stallard after earnings. "GE could have chosen not to update its guidance for the potential war impact, stating that the situation is still too unpredictable....Instead, it took the prudent approach, trimming some of the underlying business drivers."
Investors didn't appreciate the prudence. Shares dropped as low as $268.91 on April 22, down 23% from their early-March levels. Declines have left shares trading for about 40 times earnings expected over the coming 12 months, roughly equivalent to the multiple from a year ago. That's a premium to the S&P 500's 22 times multiple, but GE Aerospace has a lot of growth ahead. Earnings per share are expected to grow at a rate north of 15% annually over the next three years. There will be more growth after that, as new engines mature and the more lucrative aftermarket parts and service stream ramps up.
"Absurd reaction after their excellent Q," says Stephanie Link, Hightower's chief investment strategist, adding that she bought more shares after the report. "People are getting nervous about the Middle East conflict and the airlines cutting capacity. I think it's a buying opportunity. The backlog alone is reason for owning."
Backlogs in the commercial aerospace industry have never been larger. Boeing and Airbus have unfilled orders for some 15,000 commercial jets valued at north of $1 trillion. GE Aerospace's total backlog sits at $210 billion. Its commercial services backlog is $170 billion, up nearly $30 billion since the end of 2024.
Strong backlogs and growth are nothing new for the commercial aerospace business. Air travel grows at about 5% annually, driving demand for new planes. Boeing and Airbus, however, have had trouble delivering those planes amid Boeing's internal woes, Covid, and supply-chain problems that have persisted since the pandemic. Since 2020, there have probably been 3,000 or 4,000 planes that airlines would have taken but were never built.
Many of those jets will have GE Aerospace engines underneath the wing. The company and its partner Safran have a dominant 75% market share in single-aisle jets. It also has a strong position in twin-aisle jets, competing with RTX and Rolls-Royce.
GE Aerospace "also has that crucial balance between OEM and aftermarket sales, with its large installed base more than offsetting the losses that come with new engine deliveries," says Stallard. New engines are typically sold for a loss, with profits coming later. That's a longstanding feature of the industry.
Stallard rates shares Buy and has a $358 price target.
The company's defense propulsion business, which accounts for about one-quarter of sales, is also booming, growing 19% year over year in the first quarter. It supplies engines for F-16 fighter jets, Apache helicopters, and others. GE Aerospace's new XA102 is vying to power the Air Force's F-47 sixth-generation fighter jet. The XA102 uses advanced technology to combine the fuel efficiency of a turbofan engine with the power of a turbojet (or a low-bypass turbofan, for readers about to write in).
Engine development is key to maintaining GE Aerospace's market share. In 2025, it spent almost $3 billion on research and development, including "customer and partner" funding (mostly government contributions), or roughly 7% of sales. Other players spend billions on development, too, but the tri-opoly nature of the industry makes it easier to earn a return on that investment.
Oil prices are a threat to the stock, but even higher oil prices can drive demand for more fuel-efficient engines, so long as the economy stays stable amid those higher prices. The bigger risks for investors are persistent supply-chain problems and business execution.
Both risks are being actively managed by CEO Larry Culp, who arrived at GE in 2018 and is credited with turning the unwieldy American industrial conglomerate around. He is a disciple of lean management techniques developed in Japan that focus on collaboration and continuous improvement. GE's lean efforts extend beyond the company into the supply base, to ensure high quality and more output.
Output from suppliers was up "double digits" year over year and turnaround times at GE maintenance facilities were improving, Culp tells Barron's.
Lean shows up in GE's financial statements, too. First-quarter profit margins in the commercial aerospace business were 26.4%, up more than seven percentage points from the first quarter of 2024, just before the GE Vernova spin.
Currently, Wall Street projects $9.80 in 2028 earnings per share. That justifies a $350 share price target in 12 to 18 months. With lower oil prices and improved execution, that 2028 number could easily top $10. GE is working on a streak of 14 consecutive quarters of topping Wall Street expectations.
Wall Street loves the stock. About 85% of analysts covering the company rate shares Buy, about 30 points above the average Buy rating for stocks in the S&P 500. The average analyst price target is $347 a share.
Wall Street approval certainly isn't required for a stock to work. Still, it doesn't hurt.
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(END) Dow Jones Newswires
May 08, 2026 21:31 ET (01:31 GMT)
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