In the midst of ongoing manufacturing issues plaguing Boeing, Artisan Partners’ Chris Smith suggests that GE Aerospace is poised to come out on top. Smith points out that GE has essentially established a monopoly with their new leap engine, set to be featured on all new narrow-body planes. This engine is projected to power more than 80% of airplanes in the sky over the next decade. This significant market share is a key factor in GE’s potential for success amidst Boeing’s challenges and delivery delays.
Following the setback caused by Boeing’s 737 Max 9 door-plug blowout earlier in the year, airlines have been compelled to make use of older aircraft. This shift in the industry has created a surge in demand for GE’s products, as carriers seek reliable and efficient engines to power their planes. Chris Smith believes that this period of increased demand positions GE as a premier industrial stock, benefitting from the struggles faced by Boeing.
In a broader context, aerospace and defense stocks have seen a significant rally in 2024. As global geopolitical tensions escalate, these sectors have consistently reached new highs. The iShares U.S. Aerospace & Defense ETF has experienced a nearly 16% increase this year, reflecting the overall growth in the industry. GE shares have surged by 70% in 2024, while TransDigm, another aircraft components producer highlighted by Smith, has seen a 35% increase in its stock value.
Conversely, Boeing has faced challenges throughout the year, with its shares dropping by 34% in 2024. The company has been under increased scrutiny following the door-plug blowout incident and reported a wider-than-expected loss in the second quarter. Revenue numbers have also fallen below expectations, indicating a turbulent period for Boeing.
Looking ahead, Chris Smith views GE as a beneficiary of the reinvestments in U.S. manufacturing that are currently taking place. After years of heavily outsourcing production, there is now a trend towards bringing manufacturing processes closer to home. This shift, driven by de-globalization and supply chain revisions, is expected to accelerate manufacturing construction significantly. GE stands to benefit from this changing landscape, further solidifying its position in the market.
While Boeing struggles with manufacturing issues and financial setbacks, GE Aerospace appears to be in a favorable position to thrive. With a dominant market share, increased demand for its products, and a supportive environment for U.S. manufacturing, GE stands out as a promising industrial stock in the aerospace sector.