Why GE Aerospace Stock Soared in January

For years, the aerospace business housed inside the General Electric conglomerate was considered a crown jewel. Now on its own, GE Aerospace (NYSE: GE) is proving its mettle.

Shares of GE Aerospace gained 22% in January, according to data provided by S&P Global Market Intelligence, after the company posted a strong earnings report and provided an upbeat outlook for the year to come.

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A strong beat

GE Aerospace is a collection of aircraft engines, interiors, and other components that became an independent company in April 2024 when General Electric completed a complex, multiyear breakup. Investors had high expectations for this business, and its fourth-quarter results did nothing to dispel that enthusiasm.

GE earned $1.32 per share on sales of $10.8 billion, easily topping the consensus estimate for $1.04 per share on $9.5 billion in revenue. Earnings per share more than doubled and free cash flow was up more than 20% year over year.

The outlook for 2025 was just as promising, with GE reporting orders in the quarter up 46% year over year. CEO Larry Culp forecast double-digit revenue and earnings growth and strong free cash flow in the new year, saying, "I'm confident in our ability to accelerate output and deliver for our customers."

The company also announced a 30% dividend increase and said it intends to repurchase upward of $7 billion worth of shares in 2025.

The results had a good impact on Wall Street, with at least a half-dozen banks raising their price target on the company.

Is GE Aerospace stock a buy?

About 75% of GE Aerospace sales come from commercial aerospace, a sector that has been impacted in recent years by issues at Boeing and supply constraints that have limited production of new aircraft. Both Boeing and Airbus have multiyear backlogs of future orders.

GE Aerospace should benefit as these orders get filled, but the lack of new planes also works in the company's favor. Aerospace suppliers including GE tend to get higher margins on spare part sales and should benefit as airlines are forced to keep older planes in service for longer while awaiting deliveries.

This is a cyclical business and all trends point to the cycle accelerating in the years to come. Shares of GE Aerospace are up 27% in the last six months, and the ingredients are in place for this company to fly higher in the quarters to come.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends GE Aerospace. The Motley Fool has a disclosure policy.