(Bloomberg) -- General Electric Co.’s transformation is being led by its aviation business, given the unit’s stability and underlying growth, Citi analyst Andrew Kaplowitz wrote in a note to clients.
While the aviation business is not perfect, it does seem to be “operating on all cylinders,” the analyst said. He noted that the company is raising the projected growth for its military segment and continuing to gain share versus its primary competitor with large new orders announced at the Paris Air Show.
GE and Safran SA’s joint venture, CFM International, earlier this week also won a $20 billion order for jet engines from Indian carrier IndiGo.
“We sense a new energy in aviation and across GE especially regarding cash generation led by CEO Culp,” Kaplowitz added. The analyst maintained the buy rating on GE with a price target of $14.
GE is currently undergoing a turnaround process after an unraveling that has wiped out more than 60% of the company’s market value over the past two years, and prompted the diversified manufacturer to divest multiple businesses. While its power turbine business is widely understood to be the most troubled, the aviation unit is often lauded as a competitive, well-run unit.
JPMorgan analyst Stephen Tusa, who holds a bearish view on the stock, said the aviation business would have a valuation of about “$60 billion at best,” assuming a 2021 free cash flow yield of about 7%.
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