General Electric stock is on track for its highest close in more than five years. Figuring out why shares of the American industrial conglomerate are rallying is a little more difficult.
In midday trading Thursday, GE shares (ticker: GE) shares were at $118.46, up 1.9%. The S&P 500 and Dow Jones Industrial Average, for comparison, were down 0.1% and 0.4%, respectively. If GE stock remains around that level, it would be the highest close for shares since Nov. 10, 2017 when they closed at $122.96, according to Dow Jones Market Data. The stock would also close above its 200-month moving average for the first time since that year.
GE is having quite a month and an even better year. Shares are up 8.5% in November and have rallied 80% so far in 2023, on track for their best year on record based on data since 1972.
The Dubai Air Show is happening this week, and might be helping. Boeing (BA) and Airbus (AIR.France) are racking up new orders, and Boeing's twin-aisle jets appear to be selling well. GE makes a lot of those. It also makes a lot of twin- and single-aisle engines for both aircraft makers.
There's another potential boost to shares: problems at competitors that make GE look better by comparison. In commercial aerospace, peer RTX (RTX), formerly named Raytheon Technologies, said it had a parts problem with its geared turbofan jet engine. In wind power, concerns about Siemens Energy's wind business, Siemens Gamesa, and technical issues with turbines have weighed on the company's valuation .
To be sure, the wind business has been tough for GE, too. Uncertain government policies, high costs in offshore wind, and inflation have hurt the business for years. GE's wind unit lost $317 million in the third quarter, an improvement from $934 million lost in the third quarter a year ago.
But GE, ironically, has benefited in from challenges in its wind business. Danish renewable-energy company Orsted recently canceled two offshore wind projects off the coast of New Jersey. Some of those projects were in GE's backlog. While losing backlog isn't ideal, it's seen as OK if the business was going to lose money, as it would have in this case.
GE shares might also be benefiting from simply being the "best house in a bad neighborhood," says Melius analyst Scott Davis.
The industrial economy is shrinking. The Institute for Supply Management Industrial Purchasing Managers Index, or ISM PMI, has been below 50 for a year. A level above 50 indicates growth.
GE has seen some growth, though. Coming out of the pandemic, GE's aerospace business has been growing thanks to a pickup in demand for air travel.
BofA Securities analyst Andrew Obin recently wrote positively about strong organic growth for GE, relative to other industrial companies he covers, partly because of strong aerospace end markets. He rates shares Buy and has a $135 price target.
Scott Davis doesn't cover GE shares anymore. Melius' aerospace analyst Robert Spingarn does. He rates shares Buy and has a $134 price target for the stock.
Overall, about 61% of analysts covering the company rates shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target is about $133 a share.