Ashar Jawad
2 min read
In This Article:
Northcoast Research on Monday downgraded GE Aerospace (NYSE:GE) to Neutral from Buy, amid concerns about the company’s valuation, following a 29% surge over the past month.
The stock has had impressive returns this year on the back of GE Aerospace (NYSE:GE)’s ambitious plan to invest up to $1 billion in its US facilities in 2025 to strengthen manufacturing and innovation. Investor sentiment has also been bolstered by notable high-value contracts, including a $5 billion IDIQ award from the US Air Force to support Foreign Military Sales (FMS) for the F110-GE-129 engines.
A huge in-process machining center producing parts for aircraft and aerospace systems.
However, analysts at Northcoast Research argue that GE Aerospace (NYSE:GE)'s rally also coincided with reducing concerns about the ongoing trade wars, a manageable import tariff impact seen for aerospace OEMs and suppliers, improved aircraft production, and press reports about positive developments in the industry.
Analysts say that while there could be short-term momentum, the risk-reward profile has diminished for GE Aerospace (NYSE:GE) in the wake of recent contrasting views from Wall Street and aerospace suppliers. Chris Olin, analyst at Northcoast Research, believes ongoing trade disputes could reignite inflation and result in aircraft delivery delays. He also noted slowing domestic airline traffic, which could jeopardize GE Aerospace (NYSE:GE)’s forecasted 10% CES service sales growth.
Olin stated the following in a note to clients on May 19:
“There are just too many unsolved questions surrounding the aero peer group for us to keep buy ratings in place.”
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Disclosure: None.
