Alcoa Inc (AA), General Electric Company (GE): Aluminum Giant Says Buy Airplanes

The Power of Flight

For those seeking a lower price point, General Electric Company (NYSE:GE) shares are trading at a PE multiple of around 17 and remain well off of their all-time highs. Aloca notes that “new aircraft orders also translated into new orders for jet engine…General Electric Company (NYSE:GE) recorded over $26 billion in engine deals” at the Pairs Air Show. The Aviation segment represented nearly 14% of the company’s top-line in 2012.

While that’s not a massive business, it’s second only to the Power and Water division on the industrial side (General Electric Company (NYSE:GE)’s financial arm accounted for around 31% of the top-line). So, a positive outlook for airplane sales is a notable plus for GE’s turnaround efforts.

The industrial giant got itself into trouble in the recession because it had allowed the finance division to become too large and let it venture into non-core businesses. Chastened by taking a government handout and cutting its dividend, General Electric Company (NYSE:GE) is getting back to its industrial roots. It sold NBC and is shrinking GE Capital, albeit slowly. That said, there have been discussions of a potential spin-off of non-core segments of General Electric Company (NYSE:GE)’s finance division, which would be a quick way to reduce the risk of that segment.

The shares yield around 3.2% and earnings have headed higher in each of the last four years. That should interest growth and income investors, particularly those looking for a turnaround story. Note that the company just reported solid second quarter earnings, too.

A Trio to Watch

For investors interested in out of favor industries, Alcoa is a great option for getting into the aluminum market. It has been performing well despite the industry’s rough patch and should benefit notably when aluminum prices solidify. The Boeing Company (NYSE:BA), meanwhile, is a key customer and one that Alcoa Inc (NYSE:AA) expects to do well for years into the future. The same is true of General Electric. Although The Boeing Company (NYSE:BA) is a bit pricey, making it appropriate for growth investors, GE should interest those is search of growth and income.

The article Aluminum Giant Says Buy Airplanes originally appeared on Fool.com and is written by Reuben Brewer.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company. Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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