A solid financial report by GE Aerospace brought back memories of the old GE on Wall Street, which reported solid sales quarter after quarter for over a decade. However, something is different this time: The new company is smaller than in those days, and sales growth is organic rather than the result of aggressive acquisitions.
Sales growth was strong across all business segments, led by the commercial engine and services division.
These results come almost a year after the company officially turned from a division of the old GE into a separate entity and began trading on Wall Street.
Management highlighted the company’s first year of solid growth as a standalone company.
“GE Aerospace delivered a strong finish to 2024 given robust demand for our services and products with fourth quarter orders up 46 percent, EPS [earnings per share] more than doubling, and free cash flow increasing over 20 percent,” GE Aerospace chairman and CEO H. Lawrence Culp, Jr. said in a statement following the release of the financial results.
“Our performance capped off a monumental first year as a standalone company with $1.7 billion of profit growth and $1.3 billion of free cash flow growth.
“Looking to 2025, we expect double-digit revenue and EPS growth with greater than 100 percent free cash-flow conversion. Guided by FLIGHT DECK, our proprietary lean operating model, I’m confident in our ability to accelerate output and deliver for our customers.”
Old GE was a conglomerate formed by a slew of acquisitions, which won the cheers of Wall Street as they helped it grow sales steadily almost quarter after quarter.
However, the problem with these acquisitions is that they were outside the company’s core business, creating a few synergies and plenty of management issues as the conglomerate became too big to be managed effectively.
In addition, the acquisitions came at too high a price, eventually raising the cost of capital to finance them while reducing the capital returns of the new investments.
As a result, old GE fell into a value trap: a company with a low valuation that continued to grow, destroying rather than creating shareholder value.
Wall Street doesn’t like to invest in this kind of company, because investors prefer to allocate capital to companies that create value, and thus fled the stock of GE, which underperformed the broader market.
That’s when the iconic company’s reverse count began. In 2021, its leadership split it into three companies, with GE Aerospace as one of them (the other two are GE Verona and GE Healthcare).
So far, the strategy of turning GE Aerospace into a separate entity has been working. Unlike the old GE, the new company is growing organically rather than through acquisitions.
Wall Street has been enthusiastic about the company’s prospects, sending its shares up 91 percent since it went public in April 2024, beating the broader market.
