GE stock surges to six-year high: What's behind the move?

Key Points

• General Electric's stock achieved a six-year closing high on November 16.
• The stock has posted a 78.67% gain this year, outperforming the S&P 500's 17.28% increase.
• GE is the top-performing stock within the S&P industrials sector year-to-date.

Shares of General Electric NYSE: GE posted its highest closing price in six years on November 16. 

So what's going on here? 

The stock has been on fire this year, advancing 78.67%, far outperforming the S&P 500's gain of 17.28%. 

GE's business has changed recently, as the company spun off GE Healthcare Technologies Inc. NASDAQ: GEHC. 

The company plans to spin off GE Vernova and launch GE Aerospace early in the second quarter of 2024.

GE Aerospace to keep GE ticker

Following the planned spin-off's completion, GE Vernova shares will trade on the New York Stock Exchange under the ticker symbol "GEV," and GE Aerospace will continue GE's listing on the New York Stock Exchange under the ticker symbol "GE."

GE Vernova is comprised of GE's portfolio of energy businesses, including power, wind, electrification and digital. The company's focus is sustainable energy. 

When it comes to the aerospace business, GE may be generating business at the Dubai Air Show, where businesses place orders for all manner of airline-related equipment. 

GE makes jet and turboprop engines, as well as systems for commercial, military, business and general aviation aircraft. In addition, aerospace competitor Raytheon Technologies Corp. (NYSE: RTX) has reported manufacturing flaws with components for its geared turbofan jet engines. 

GE's aerospace business has grown after the pandemic as travel picked up.  

Headwinds to wind power business

Meanwhile, in the wind power business, rival Siemens has had equipment problems with its wind turbines. 

Those issues may be helping GE snag business in those areas. 

In a strange twist, the cancellation of contracts in the wind power industry, due to higher costs, is helping GE. The company makes offshore wind turbines that are the subject of some order cancellations. 

In the company's third-quarter earnings conference call on October 24, GE CEO Larry Culp said, "Next year, we expect offshore will have similar losses, but substantially improved cash performance." Culp added that the company expects the offshore wind business to lose $1 billion this year and about the same in 2024. 

However, because of GE's order backlog, analysts haven't been too upset about those business-unit losses. 

Those wind turbines are part of the Vernova business that will be spun off next year. 

Top performer within the industrials sector

Within the universe of industrial stocks, GE is the top performer in the Industrial Select Sector SPDR Fund NYSEARCA: XLI year-to-date. 

GE stock closed at $118.94 on November 16, putting it less than 1% above its $117.96 buy point. 

It's generally not a good idea to chase a stock too far beyond a buy point. That means the stock is actionable until it reaches the price of $123.86, which is 5% above its buy point.

In late October, a team of Bank of America analysts led by Andrew Obin reiterated their "buy" rating on GE. Its price target on GE is $135. 

Raising free cash flow estimates

Bank of America NYSE: BAC also raised its 2023 free cash flow estimate by $0.7 billion to $5.1b billion. The bank also raised its 2024 free cash flow estimate by $0.1bn to $5.8 billion, mainly due to a higher forecast for GE's earnings before interest, taxes, depreciation and amortization.

MarketBeat's GE analyst forecasts show a consensus view of "moderate buy" with a price target of $122.93, an upside of just 3.35%. Bank of America's forecast is much more optimistic. 

Analysts expect GE to earn $2.62 a share this year, an increase of 96%, outpacing the average S&P growth rate. Bank of America's forecast is $2.65 a share. 

For 2024, Wall Street's consensus estimate calls for earnings of $4.56 a share, which would be an increase of 74%. Bank of America's 2024 forecast of $4.22 is lower than the consensus. 

A look at MarketBeat's General Electric earnings data shows the company beat both earnings and revenue views in each of the past three quarters.