Goldman Sachs’ Stocks With Highest Consensus Returns: 42 Stocks With The Highest Consensus ROE

6. GE Aerospace (NYSE:GE)

Consensus ROE: 45%

Number of Hedge Fund Investors in Q2 2024: 86

GE Aerospace (NYSE:GE) is the freshly formed aerospace successor of the General Electric company. As the name suggests, the firm is a defense and aerospace contractor and sells products such as aircraft engines and systems. Consequently, GE Aerospace (NYSE:GE)’s hypothesis is split between the performance of the aviation industry and the defense sector.  On the former front, aviation continues to. be in turmoil as production troubles at Boeing have reduced the demand for new engines and grown demand for refurbished ones. The latter front is thriving, as conflicts in Eastern Europe and the Middle East coupled with tensions in the South China Sea ensure defense contractors receive a steady flow of funds to develop the latest weapons and associated products. Fortunately for GE Aerospace (NYSE:GE), refurbishment and after sales service are high margin businesses that contribute more to the bottom line compared to the top line.

During the Q2 2024 earnings call, GE Aerospace (NYSE:GE)’s management commented on the trends that it’s observing in the spare parts market:

“No, no, you’re right. I mean, we had a good second quarter on orders. We had a good first half. I mean services orders were kind of, as you said, mid-30s for the second quarter, up 30% or so for the first half. Strong book-to-bill here in the first half of the year on top of a good book-to-bill we saw in 2023. So the momentum is definitely there on the services side. And as you look at the back half of the year, we are expecting the services growth to be a little bit higher in the second half than in the first half, right, both the shop visits and on spare parts on a year-over-year basis. So we delivered 9% internal shop visit growth in the first half of the year. And if you look at our low to mid-teens guidance on shop visits, that would imply that shop visits will be closer to high teens in the second half of the year on a year-over-year basis.

So that’s what we are projecting. But overall, it’s mid-teens services growth, and that is consistent with what we think the future years will look like. I think that we had – when we look at our 2025 outlook, we were projecting continuous strong services growth. So it’s good to see the strong orders growth, good to see, as Larry said earlier, LEAP gaining share on the overall air traffic departure side as well.”