By Sam Boughedda
Jefferies upgraded General Electric (NYSE:GE) to Buy from Hold, raising its price target on the stock to $120 from $90 per share in a note to clients Thursday.
Jefferies analysts said GE Aerospace is a "high-growth, profitable engine franchise" with ~70% AM mix and "ramping engine deliveries for LEAP (+50% in '23) and GEnx (+53%) given sole-source (MAX) and competitive majority share (A320neo, 787)."
"LEAP deliveries increase 50% in 2023 to 1,700 engines and step-up to 2,000+ in 2024, aligned to aircraft production rates and supported by existing capacity," they wrote.
General Electric shares are currently trading at $99 per share after a 51% rise so far in 2023. Meanwhile, the analysts added that there is a pathway to 20% aerospace margins for the company.
"Profit margins ramp toward 20% by mid-decade from 18.3% in 2022, w/ Services driving the 150 bps of expansion to our 19.8% est in 2025. OE is a 30 bps headwind in '23 but LEAP curve helps to 2025 before GE9X deliveries begin in late 2025/2026 at an initial est loss of ~$10MM per (Ex 70). Net productivity is an est 1.2-pts on avg in '24/'25, w/ each 1-pt = $0.20 to 2025 EPS of $5.20. Net price/cost is positive to address inflation w/ our ests for 0.4-pts on avg in '24/'25," the analysts explained.