GE Aviation stock price is rising: is it a good buy today?

GE stock price has surged this year, helped by the strength of the civil aviation industry. It jumped to a high of $250 in the futures market, and is hovering slightly below the year-to-date high of $257. It has soared by over 57% this year, valuing it at over $255 billion. 

Civil aviation demand is still strong

GE Aviation is the world’s biggest aviation engine manufacturer globally. It makes engines for aircraft like Boeing 777, 787, Airbus A320, and 737, among others.

The company manufactures these engines, sells them to airlines, and also enters long-term service agreement (LTSA) with these companies. This arrangement helps it to make money for a long time after it sells the engine. 

GE Aviation’s business has done well in the past few years as many airlines have placed huge orders. Boeing has a backlog of over 5,000 planes, while Airbus has a backlog of over 8,000. 

These companies have received huge orders lately. For example, Qatar Airways recently placed a large order worth $96 billion. Most of these planes will be the 787 Dreamliner and the 777X planes.

Similarly, AviLease, a Saudi Arabian company, made a large order of up to 30 737 MAX planes. There are reports that Chinese airlines will order up to 500 Airbus planes next month. 

All these benefits GE Aviation because it will be the supplier of some of these engines. This also explains why the Rolls-Royce share price has jumped to a record high this year. 

GE Aviation is also benefiting from the ongoing geopolitical issues that have led to a surge in demand for defense items. This is notable since GE is a top manufacturer of military aircraft engines.

Strong financial earnings

The most recent results showed that GE Aviation’s business is doing well. Its orders rose by 12% in the last quarter to $12.3 billion, while its adjusted revenue jumped by 11% to $9 billion. Most importantly, its commercial backlog jumped to over $140 billion. 

Analysts anticipate that GE Aviation’s business will continue growing this year. The average revenue estimate is that its second-quarter revenue will rise by 15.60% to $9.51 billion, while its annual revenue will be $39.7 billion and $44 billion next year. 

Further, GE will continue being highly profitable, with its annual earnings per share (EPS) rising to $5.57 this year and $6.5 next year.

Still, there are signs that the company is highly overvalued, with its trailing price-to-earnings (PE) ratio being 39, and the forward metric being at 44. These are huge numbers, even for an industrial company that is growing by double digits. 

GE stock price forecast

The daily chart shows that the GE share price bottomed at $160 in April and then bounced back to the current $250. Most recently, it retreated to a low of $232 and then bounced back to $250.

The stock has remained above the 50-day and 100-day Exponential Moving Averages (EMA). Moving above that level is a sign that bulls are in control. 

Therefore, the stock may jump and retest the year-to-date high of $257. A move above that level will invalidate the double-top pattern and point to more gains, potentially to $300. 

The alternative scenario is where the stock rises to $257 and then retreat to the double-top’s neckline at $232. A move below that level will point to more downside.