GE Aerospace is poised to emerge victorious amidst ongoing manufacturing challenges faced by Boeing, as stated by Artisan Partners’ Chris Smith. With the introduction of their new leap engine, GE has essentially solidified their position as a monopoly in the industry. This engine is set to power the majority of new narrow-body planes, potentially accounting for over 80% of the engines in operation over the next ten years. The portfolio manager of the Antero Peak Group at Artisan believes that the delivery setbacks resulting from Boeing’s 737 Max 9 door-plug incident in January are driving airlines to rely on older aircraft, consequently sparking a surge in demand for GE’s products.
Despite the challenges faced by Boeing, GE and other aerospace and defense stocks have been flourishing in the market. The iShares U.S. Aerospace & Defense ETF (ITA) has seen a notable 16% increase in value this year. In particular, GE shares have surged by 70%, while TransDigm, a key player in aircraft components production, has experienced a 35% uptick. On the contrary, Boeing shares have struggled, plummeting by 34% in 2024 due to the negative impact of the aforementioned door-plug incident. The company’s financial performance has also taken a hit, with a larger-than-expected loss reported in the second quarter along with revenue falling short of expectations.
Chris Smith further suggests that GE stands to benefit from the resurgence of investments in U.S. manufacturing. After years of extensive outsourcing, there is now a notable shift towards local production and a reduction in dependence on global supply chains. This trend is accelerating the growth of manufacturing construction within the country. Smith views this as a positive development for GE, positioning them favorably in the current economic landscape.
Despite the setbacks faced by Boeing in 2024, GE Aerospace appears to be in a strong position to excel in the market. With their monopoly-like dominance through the leap engine and the overall positive performance of aerospace and defense stocks, GE stands out as a premier industrial stock. The company’s strategic positioning and the resurgence of U.S. manufacturing investments are key factors contributing to their potential success in the foreseeable future.