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BofA cuts GE Aerospace stock target, maintains buy rating

EditorNatashya Angelica
Published 08/04/2024, 16:16
© Reuters.

On Monday, BofA Securities revised its price target for GE Aerospace, traded on the New York Stock Exchange under the ticker NYSE:GE, reducing it to $165 from the previous stock target of $175. Despite the adjustment, the firm continues to recommend a Buy rating for the stock.

The adjustment in the stock price target reflects a shift in the valuation method for GE Aerospace. BofA Securities has transitioned from using enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) to a price to free cash flow (P/FCF) valuation for the year 2025. The new price target is based on a relative P/FCF multiple of 1.2 times compared to the S&P 500's 2025 estimates.

The revised stock target of $165 is underpinned by a specific P/FCF multiple for GE Aerospace. BofA Securities believes that a multiple of 26 times the projected free cash flow for GE Aerospace is justified.

This multiple is seen as an accurate reflection of the current robust demand in the commercial original equipment (OE) market, the growth of the aftermarket shop visits, and the expected profitability of the LEAP program by the year 2025.

BofA Securities' analysis indicates confidence in GE Aerospace's market position and financial prospects. The firm's valuation takes into account the company's performance indicators and industry environment, projecting a positive outlook despite the adjustment in the price target.

In summary, BofA Securities has updated its investment perspective on GE Aerospace, tweaking the price target to reflect a standalone valuation and a new valuation methodology. The maintained Buy rating suggests continued optimism about the company's growth and profitability potential in the coming years.

InvestingPro Insights

Following BofA Securities' revision of GE Aerospace's price target and the maintained Buy rating, it's insightful to consider the latest data and analysis from InvestingPro. The company's market capitalization stands at a robust $169.41 billion, reflecting its substantial presence in the market.

Investors may find GE's P/E ratio of 18.46 to be relatively high, which is further emphasized by the adjusted P/E ratio for the last twelve months as of Q4 2023, coming in at 32.96. This could suggest that the stock is priced optimistically in terms of its earnings.

Looking at recent performance, GE has experienced a significant return over the last week, with a 1-week price total return of 11.76%. This is part of a larger trend of strong returns over various periods, including a 109.82% return over the last year, indicating robust investor confidence and market performance. Moreover, with a dividend yield of 0.2% and a history of maintaining dividend payments for 53 consecutive years, GE demonstrates a commitment to providing shareholder value.

InvestingPro Tips highlight that analysts have revised their earnings upwards for the upcoming period, which could signal further confidence in the company's financial health. However, they also anticipate a sales decline in the current year. GE is recognized as a prominent player in the Industrial Conglomerates industry, which may be a factor in its sustained market performance.

For investors looking for more in-depth analysis and additional tips, InvestingPro offers further insights on GE, which can be accessed at https://www.investing.com/pro/GE. There are 14 additional InvestingPro Tips available, which can be accessed with an exclusive offer using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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