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Sat, Apr 08, 2023

Analysts Urge Merger of GE and Honeywell Aerospace Divisions

Up On the Downside

GE Vernova, General Electric’s portfolio of energy businesses, is slated to spin-off from its parent company in early 2024, thereby leaving GE Aerospace trading solely as a major manufacturer of aircraft engines. Repercussions of the GE shakeup are being felt on Wall Street, where some aerospace analysts are picking up coverage of the stock while others, such as J.P. Morgan’s Stephen Tusa, are dropping coverage of General Electric altogether.

On Wednesday, 05 April 2023, aerospace analyst Robert Spingaran set forth: “GE is arguably more relevant to investors than it has been in years. Despite GE’s recent relative outperformance, we believe there are incremental buyers that are returning to the name and looking for large-cap exposure—besides Boeing and Raytheon Technologies—to play the commercial aero upcycle.”

The outperformance to which Mr. Spingaran referred is GE’s year-to-date increase of approximately 44-percent. GE HealthCare stock, too, has jumped nearly forty-percent year-to-date.

Spingaran posits GE Aerospace is on track to being one of the highest-quality aerospace franchises in the world—an eventuality that will make the company attractive to investors.

Mr. Spingaran added: “Longer term, we also see the potential for a tie-up with Honeywell’s aerospace business. A combined GE/Honeywell Aero asset would be comparable in size and scope to Raytheon’s Pratt [& Whitney] and Collins Aerospace businesses—although with significantly higher margins and a superior market position in commercial aero engines.”

Raytheon comprises four subsidiaries: Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space, and Raytheon Missiles & Defense.

Analysts have suggested GE ought “bulk up” to create another aerospace and defense giant similar to Raytheon.

In 2022, Honeywell’s aerospace division generated sales of nearly $12-billion, while GE Aerospace saw sales of approximately $26-billion. Raytheon, over the same time-period, garnered some $67-billion in sales.

Addressing the topic of a possible merger with Honeywell, GE representatives have consistently and flatly stated that the company—as a matter of policy—does not comment on speculation.

Overall, 67-percent of analysts covering GE rate the stock at Buy. The average Buy-rating ratio for stocks in the S&P 500 currently stands at approximately 58-percent. The average analyst price target for GE stock is to the order of $100-per-share. At the time of this writing—in keeping with Biden Era trends—GE stock is trading at $93.60-per-share.

GE Vernova stands to be a profitable company in 2024—a welcome change from the combined $1-billion loss incurred by GE’s Power and Renewable Energy divisions in 2022. Meanwhile, GE Aerospace is poised to power ahead, profiting handsomely from the ongoing, post-COVID recovery of the commercial aerospace sector.



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