GE Aerospace raised its full-year profit outlook after a stronger-than-expected second quarter, and BofA lifted its price target on the stock in response. Shares are consolidating above their prior buy point after a June breakout, with traders watching for a fresh entry signal.
GE Aerospace climbed 1.8% to $360.07 last week after the jet engine maker posted second-quarter results that beat expectations and pushed management to raise its full-year guidance. The gain came even as the stock slid 3.6% on Wednesday when rising long-term Treasury yields following the Federal Reserve meeting hit broader markets.
Quarterly beat drives a guidance raise
Earnings jumped 22% to $2.02 a share, while revenue grew 24.5% to $12.6 billion. The commercial engines and services division led the gain, with revenue up 27% to $9.7 billion as equipment sales climbed 30%, outpacing 26% growth in higher-margin services revenue. The defense division also contributed, with revenue rising 16% to $3.4 billion.
That mix pressured the division's operating margin, which fell to 27.3% from 28.9%. Following the results, GE raised its full-year earnings outlook to a range of $7.65 to $7.85 a share, up from $7.10 to $7.40. The company also lifted its commercial services revenue growth target to a "low 20s" percentage from a prior "mid-teens" forecast.
Analysts raise price targets
BofA analysts hiked their price target on GE to $405 from $365 and kept a buy rating, forecasting double-digit earnings growth through the decade, according to The Fly investment news site.
Stock nears a breakout
The stock has been consolidating above its prior buy point since a June breakout. GE recovered from a post-earnings shakeout on July 16 to reclaim that level.
A move above last week's high of $366.77 would flag an early entry signal as GE clears the trendline sloping down from its July 2 high. GE could form a flat base within another week.
Source: Investor's Business Daily
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