Reporting its Q1 earnings on Tuesday, April 21, the market will be watching to see whether surging global defense spending provides an additional boost to GE Aerospace’s GE) quarterly results and outlook.
The strong stock performance of GE has been supported by broad-based strength across commercial aviation services and major engine orders, with defense spending providing an additional tailwind. Rising U.S. and European defense spending has been a factor in increasing demand for GE’s military aviation technologies in particular.
However, with an extended ceasefire and potential deal between the U.S. and Iran in the cards, GE stock has lost some momentum and is now down 1% this year. That said, GE is still sitting on monstrous gains of +200% in the last three years, and investors may be eying a more than 10% dip from its 52-week and all-time high of $348 a share as a buying opportunity.
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GE’s Q1 Expectations
Based on Zacks estimates, GE’s Q1 sales are expected to spike 18% to $10.61 billion from $9 billion a year ago. On the bottom line, Q1 earnings are expected to be up 7% to $1.60 per share compared to EPS of $1.49 in the prior year quarter.
As illustrated by the green arrows in the EPS surprise chart above, GE has surpassed the Zacks EPS Consensus for 13 consecutive quarters, posting an average earnings surprise of 14.27% in its last four quarterly reports, as shown below.
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The Zacks ESP
The Zacks ESP (Expected Surprise Prediction) indicates GE could once again surpass earnings expectations, with the Most Accurate and recent estimate among Wall Street analysts having GE’s Q1 EPS pegged at $1.64 (Current Qtr below) and 2.34% above the underlying Zacks Consensus.
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Tracking GE’s Outlook
Optimistically, GE’s top line has continued to expand at a nice pace since spinning off its healthcare business, GE Healthcare Technologies GEHC), and its energy business, GE Vernova GEV), leading to increased probability as well.
Zacks projections currently call for GE’s FY26 EPS to increase 16% to $7.43, which is a slight improvement to the company’s guidance range of $7.10-$7.40. While GE hasn’t provided full-year revenue guidance, Zacks projections call for FY26 sales to rise 14% to $48.16 billion. Even better is that FY27 EPS and sales are projected to expand another 16% and 10%, respectively.
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Summary & Final Thoughts
Increased global defense spending will likely enhance GE’s near-term outlook, contributing to growth in its core aviation operations. This comes as the Zacks ESP indicates GE could once again report stronger-than-expected quarterly earnings, which may be needed with its stock trading at a forward P/E multiple of 40X.
For now, GE stock lands a Zacks Rank #3 (Hold) as blowout Q1 results and favorable guidance could be crucial to more upside. To that point, GE is still commanding a notable premium to the benchmark S&P 500 and its Zacks Aerospace-Defense Industry average in terms of forward P/E, with both trading below 24X.
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This article originally published on Zacks Investment Research (zacks.com).