High-Flying GE Aerospace Drops After Blowout Q2 — What Now?

Core Viewpoint - GE Aerospace reported strong Q2 earnings, significantly exceeding expectations, but the stock price fell despite positive results [3][4][6]. Financial Performance - Adjusted revenue for Q2 reached $10.2 billion, a 23% increase year-over-year, surpassing consensus expectations [3]. - Adjusted earnings per share (EPS) were $1.66, reflecting a growth of over 38% compared to Q2 2024, exceeding the anticipated 19% growth [3]. - The company raised its 2025 revenue growth guidance to the mid-teens, up from low-double digits, and adjusted EPS midpoint to $5.70 from $5.28 [4]. Market Expectations - Analysts had already raised their expectations prior to the earnings report, which diminished the impact of the strong results [6][7]. - The stock had risen 48% since the last earnings report, indicating high market expectations [6]. Valuation and Stock Forecast - As of July 17, GE Aerospace's stock trades at a forward P/E ratio of just under 46x, which is 21% above its average forward P/E of 38x since restructuring [10]. - The 12-month stock price forecast is $229.50, indicating an 11.81% downside from the current price of $260.22 [6]. Business Outlook - GE Aerospace has a strong market position, with 70% of its revenue coming from servicing engines, benefiting from a large installed base [9]. - The company is collaborating with Kratos Defense and Security Solutions to develop propulsion systems for unmanned aerial systems, which could drive future growth [11][12].