Strong, Positive Catalysts Make GE Stock a Buy on Weakness

The commercial aviation sector is rebounding dramatically and multiple, highly reputable analysts are issuing bullish notes on General Electric (NYSE:GE), making GE stock attractive.

The General Electric (GE) logo on a building
Source: Sundry Photography / Shutterstock.com

Additionally, GE is likely to benefit over the longer term from federal spending initiatives.

The Aviation Sector Is About to Boom

In the U.S. and many other countries, domestic leisure air travel  has come back, and domestic business travel is on the way back.

And it’s only a matter of time until international air travel rebounds sharply. For evidence of that, look no further than two of the most cautious leaders when it comes to the coronavirus: American President Joe Biden  and UK Prime Minister Boris Johnson.

The Biden administration is considering allowing more foreign tourists to enter the U.S., while Johnson plans to lift all lockdowns in his country on July 19.

With two of the most cautious countries in the process of ending draconian anti-coronavirus measures, many other nations are likely to lift international travel bans sooner rather than later.

For its part, United Airlines (NYSE:UA) has obviously seen the proverbial “writing on the wall.”  That’s why the company recently made the biggest order of aircrafts in its history, requesting “200 Boeing 737 MAX jets and 70 Airbus A320 NEO jets.”

As Seeking Alpha reported, GE’s  Aviation unit  manufactures engines for both Boeing’s (NYSE:BA)  737 MAX planes and the Airbus (OTC:EADSY) A320 NEO planes.

Clearly, United Airlines expects demand for airplane tickets to jump in the coming years, and such a trend will be quite positive for GE and GE stock.

Analysts  From Two Prestigious Firms Are Bullish on GE Stock

In a note to investors on July 1, Citi analyst Andrew Kaplowitz wrote that he expected GE’s 2021 results to be in-line with its guidance for low-single-percentage-industrial-revenue growth, excluding acquisitions, and industrial free cash flow of $2.5 billion to $4.5 billion.

After this year, the analyst expects the company’s free cash flow growth to accelerate, enabling the conglomerate to invest more in its own businesses and raise its dividend.  Kaplowitz  kept a $17 price target and a “buy” rating on the shares.

For his part, Goldman Sachs analyst Joe Ritchie expects GE to generate $4.2 billion of free cash flow this year. Over the longer term,  he thinks that its free cash flow can reach $1 per share, with a free cash flow margin of at least 10%. The analyst, whose note was released on June 29,  kept a $16 price target on GE stock and recommended buying the shares.

Washington’s Initiatives Should Help GE Stock

As part of its infrastructure plan, the Biden administration has proposed enabling electric utilities’ ” tax credits to be used like cash.” Since electric utilities are GE’s customers, that provision should meaningfully help the conglomerate.

And given GE’s large, growing wind-power business, the administration’s efforts to generate “emissions-free electricity by 2035” should significantly help the company and GE stock as well.

Finally, as I’ve noted in previous columns, I expect electricity demand to be meaningfully increased by higher sales of electric vehicles, boosting GE’s Power business in the process. Therefore, the Biden administration’s efforts to greatly raise EV sales should help GE.

I expect the vast majority of the administration’s initiatives to be passed by Congress, either through a bipartisan bill or by Congressional Democrats acting alone through the budget reconciliation process.

The Bottom Line

With the aviation sector poised to boom, Wall Street turning more bullish on GE stock, upcoming legislation improving the company’s outlook, and the shares recently dropping primarily due to warnings from an analyst who’s been wrong about the stock for years,  now is an excellent time for longer-term investors to buy the shares.

On the date of publication, Larry Ramer held a long position in GE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015.  Among his highly successful, contrarian picks have been GE, solar stocks, Ford, Exxon, and Snap. You can reach him on StockTwits at @larryramer. 


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