Analyst Insights: GE and Howmet Set for Major Earnings Growth

Analyst Insights on GE Aerospace and Howmet

In a recent analysis by a Deutsche Bank analyst Scott Deuschle, significant updates were provided regarding major players in the aerospace industry, particularly focusing on GE Aerospace and Howmet Aerospace Inc. Both companies appear well-prepared to navigate current market challenges and are expected to report impressive earnings growth.

GE Aerospace Outlook

Following a thorough assessment, the analyst has notably increased the price target for GE Aerospace to $235 from a previous $212 while affirming a Buy rating. Key expectations are set around a 9% EPS beat based on the base case scenario, and a projected 15% in a more optimistic outlook for the upcoming third quarter.

Guidance Projections

In both scenarios, there's an anticipation for 2024 guidance to be robust, with a possible 7% rise in EBIT if the more favorable expectations hold true. Produktive CSA collections from a bustling summer flying season may enhance free cash flow (FCF) well beyond expectations, leading to an upward guidance revision.

Positive Earnings Anticipation

Overall, Deuschle remains optimistic as GE Aerospace approaches their earnings release, underscoring a significant potential for surplus in earnings.

Howmet Aerospace's Positive Trajectory

Turning to Howmet, the price target has been raised to $125 from $106, accompanied by a maintained Buy rating. The anticipated EPS for the third quarter is expected to be around $0.68, outshining the consensus estimate of $0.66.

Driving Factors

This outlook is driven by strategic pricing advancements, effective operational execution leading to deliveries beyond long-term agreements, and earlier-than-expected shipments of the newly developed generation 2 LEAP HPT blades.

Future Revenue Projections

In addition, the analyst predicts that Howmet will likely guide 2025 revenue in alignment with broader market expectations (+10%). This forecast might ignite further positive revisions based on an enhanced base in 2024 and likely unexpected performance in Engine Products EBITDA margins.

Boeing: A Contrasting Performance

In contrast, the same analyst made downward adjustments to Boeing Company, decreasing the price target from $225 down to $195 while retaining a Buy rating. A notable concern is a forecasted third-quarter cash flow burn of ($4.0 billion), which marks an increase from the previous estimate of ($2.4 billion). This revision largely stems from disruptions caused by strikes impacting deliveries in September.

Financial Challenges Ahead

The financial outlook includes expectations for significant EBIT losses at both Boeing Defense Systems and Boeing Commercial Airplanes, with total projected losses amounting to $2.6 billion. The forecast related to Boeing Commercial Airplanes reflects anticipated forward losses on the 777X project, highlighted by delays in entry to market combined with rising costs due to labor negotiations.

Conclusion: Market Confidence Remains High

Overall, while GE Aerospace and Howmet are positioned strongly for the upcoming earnings announcements, Boeing faces a tougher road ahead. Market analysts remain hopeful about the aerospace sector's resiliency despite the challenges faced by certain companies.

Frequently Asked Questions

What did Deutsche Bank analyst Scott Deuschle say about GE Aerospace?

He raised the price target for GE Aerospace to $235, indicating strong expected earnings performance.

What are the earnings expectations for Howmet Aerospace?

The analyst expects Howmet to report an EPS of $0.68 for the upcoming third quarter, above consensus estimates.

How does the current aerospace market impact GE and Howmet?

The companies are viewed as resilient against market challenges, likely leading to significant earnings growth.

What are Boeing's recent financial challenges?

Boeing is facing significant cash flow burns and projected losses due to strikes and ongoing operational issues.

What factors contribute to Howmet's positive outlook?

Factors include strategic pricing, strong execution, and increased revenues projected for 2025.

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