It’s been a tough year for, General Electric (NYSE:GE), one of America’s most storied companies, but things are finally looking up. The coronavirus pandemic took its toll on the global conglomerate pushing its stock down 34.7% this year. Although the S&P 500 has recouped its losses, GE stock is still behind by 40 percentage points.
However, recent movements have suggested bullish tailwinds for the stock in the next few months. While nothing can be confirmed until the company reports its earnings next week, the evidence points to stronger performance. It’s also worth noting that GE stock popped by $1 this month.
GE Stock Pops As The 737 Max Takes Flight
GE stock saw a 6% uptick after the EU announced that Boeing’s (NYSE:BA) 737 Max could take flight by the end of 2020. General Electric manufactures the LEAP engines for the 737 Max. The return of the flight is great news for the company that has been on a downward spiral since the onset of the pandemic.
GE’s aerospace business is amongst its worst-performing sectors. In the second quarter, the segment declined by 44% in a year-over-year comparison. Experts estimate this value will fall by 39% in Q3.
This optimism surrounding the aviation industry will be one of the major growth drivers for GE stock. This isn’t due to the resurgence of travel but from new developments in the Covid-19 vaccine. The imminent approval of a Covid vaccine has pushed airline stocks higher in the last few months. However, industry shares still remain down by 60% since the start of the year.
General Electric’s largest operating unit is its airline sector, makes up 70% of its total bottom line. Hence, even a sliver of good news in the aviation industry can do wonders for its share price. As we approach some semblance of a new normal, GE stock is poised for a greater upside.
GE Leaves Coal In Its Dust
General Electric is one of America’s oldest companies has always been an advocate for coal mining. However, in a surprising turn of events, the company has decided to bail on coal altogether. This will include divestitures, layoffs and site closures in its coal business.
The company’s goal is to focus its efforts on renewable resources and lower its carbon footprint. Many consider this to be a massive pivot for the company that has made some big bets on coal in the past. GE plans to use its resources and make renewable energy more reliable, affordable and accessible to everyone.
In line with the “exit coal” announcement, the company announced two major partnerships that will spearhead the transition to clean energy. GE signed a deal with Dogger Bank, the world’s largest wind-farm to supply 190 wind turbines. The first two phases of Dogger’s three-phase project will be powered by GE’s 13MW Haliade-X.
The company’s second deal is with the Russian Energy group, InterRAO. Russia operates a robust energy market and is looking to modernize its thermal power. However, the company does not manufacture its own power turbines and has enlisted the help of GE. In a joint venture with GE, the InterRAO plans to invest $580 million in gas turbines. Production of the turbines is expected to begin within the next five years.
General Electric’s exit from coal is a move in the right direction. As renewable energy becomes the norm rather than the exception, GE has aligned its goals to remain relevant.
The Bottom Line On GE
At the start of 2020, GE was poised for a major comeback from its rock-bottom prices. However, the pandemic brought its upward trajectory to a standstill. After a rough couple of months, GE is finally seeing the light at the end of a long and dark tunnel.
Positive news in the aviation and biotech industry will push this stock to greater highs in the coming months. Moreover, the company’s pivot away from coal and into clean energy will increase its prospects of obtaining more lucrative deals. Nevertheless, the trajectory of GE stock cannot be confirmed until the company reports its quarterly earnings on October 28.
But based on what we know so far, all arrows point to a brighter future for GE stock.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.