With GE‘s stock hitting lows unseen in the last twenty years, even lower than in the 2008 financial crisis, is there any hope of a turnaround?
Some pin hopes on GE’s Aviation segment that has consistently delivered the biggest profits for the company out of their three main businesses (power, energy and aviation).
If there is any opportunity of a turnaround in the company’s earnings and therefore hope for a higher stock price, it’s most certainly in their aviation segment.
John Flannery believed in the strength of the company’s aviation segment as a means to hedge against GE’s under performing power segment.
In many ways this was a good strategy.
GE Aviation has been growing at around 18% this year and the aviation market as a whole has surpassed exception in 2018.
What’s more with a profit derived from this segment alone of over $3 billion, for the first half of this year, it is on track to beat earnings expectations.
A big win for a currently losing stock.
To add to this when aircraft manufactures initially started to produce engines, this is in actual fact the least profitable time.
It is not the revenue from selling the engines that actually results in the most profit. Far more profit is realized through the after sale support: Services.
The maintenance and servicing of the engines they sell is when the real money begins to come into play. Producing the engines is done so at a high cost and the margins are relatively slim on the engines, themselves.
Yet the service and maintenance of the engines can really begin to pay off in a big way for the GE Aviation segment.
Whether this is enough to turn the stock price around is not clear, yet I see it as a bright light in an otherwise dark and gloomy night.