Why Is Cliff Asness Bullish On GE Aerospace (GE)?

In the ever-evolving landscape of the investment world, renowned quantitative investor Cliff Asness, co-founder of AQR Capital Management, has recently expressed a bullish stance on GE Aerospace (GE). Asness's optimism is rooted in several compelling factors that highlight the company's strong fundamentals and growth prospects. This article explores the reasons behind Asness's positive outlook on GE Aerospace.

1. Strong Order Book and Maintenance Services Business: GE Aerospace reported a jump in third-quarter profit and raised its full-year guidance, driven by its strong order book and maintenance services business. The company's adjusted earnings of $1.15 a share in the period were slightly higher than the average analyst estimate of $1.13. Adjusted sales were $8.9 billion, short of analysts' expectation for $9 billion, but the company raised its full-year earnings and free cash flow guidance. This strong performance indicates that GE Aerospace is well-positioned to capitalize on its robust order book and maintenance services business.
2. Growth in Commercial Engines and Services: GE Aerospace's commercial engines and services business continued its steady performance. Orders last quarter were up 29% over the same period in 2023, while services grew 10% on the back of higher spare parts sales, increasing shop visits, and improved pricing. This growth demonstrates a strong demand for the company's products and services, which is likely to support continued strength in GE Aerospace's consumer aviation division.
3. Defense and Propulsion Operations: Although results in the defense and propulsion operations were mixed, with revenue up 2% and profit down 18%, the company's defense business has a nearly $17 billion backlog. This backlog should keep the company busy for years, providing a stable source of revenue. Additionally, geopolitical tensions and increased defense spending are likely to support GE Aerospace's defense operations, contributing to the company's overall strength and resilience.
4. Long-term Growth Potential: GE Aerospace's defense business is likely to see material growth in the future due to geopolitical tensions and increased defense spending. Meanwhile, the company's commercial aviation division is expected to benefit from a steady climb in air travel, which should support continued strength in GE Aerospace's consumer aviation division. These long-term growth prospects contribute to Asness's positive outlook on the company.
5. Strong Leadership: Larry Culp, the CEO of GE Aerospace, has a proven track record of turning around industrial companies. His leadership and focus on improving output of aircraft engines without sacrificing safety or quality have contributed to the company's strong performance. Asness's bullish stance on GE Aerospace is likely influenced by the company's strong leadership and strategic initiatives.



In conclusion, Cliff Asness's bullish outlook on GE Aerospace is well-founded, given the company's strong order book, growth in commercial engines and services, robust defense operations, long-term growth potential, and strong leadership. Asness's positive stance on GE Aerospace is supported by the company's strong fundamentals and growth prospects, making it an attractive investment opportunity in the aerospace and defense sector.