Morgan Stanley upgrades rating due to after-market demand, GE Aerospace stock price rises

2026-02-20 15:27:27

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Investing.com - Morgan Stanley initiates coverage on GE Aerospace with an overweight rating and a target price of $425, citing the market underestimates its long-term free cash flow and pricing power. The jet engine manufacturer’s stock rose 1.5% in pre-market trading on Friday.

GE Aerospace became an independent company in April 2024, combining sustained service growth with a strong balance sheet and deep competitive barriers in long-cycle industries.

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Aircraft engines are critical mission products with high entry barriers, supporting sustained pricing power and above-trend growth.

Morgan Stanley’s $425 target price is based on an estimated $10.85 of free cash flow per share in 2028, multiplied by approximately 39 times. The firm sees a bull case target of $615 and a bear case of $230, indicating a favorable risk-reward profile.

Morgan Stanley forecasts free cash flow of $9.8 billion in 2027, $11 billion in 2028, $12.2 billion in 2029, and $13.5 billion in 2030. These estimates are 8% to 14% higher than the market consensus from 2027 to 2030. The firm states that the cumulative free cash flow from 2028 to 2030 exceeds market consensus by about 12.5%, driven by service growth, increased installed base, more engine maintenance visits, and sustained aftermarket pricing strength.

The firm also expects earnings and cash flow estimates to be further upwardly revised, noting that market consensus forecasts for free cash flow in 2027 and 2028 have already been trending higher.

Using the 2028 price-to-earnings and free cash flow ratio, GE Aerospace’s trading price is about 30% cheaper than leading commercial aerospace peers.

Morgan Stanley analysts say this gap leaves room for valuation multiple expansion while earnings expectations could also rise.

The firm adds that GE Aerospace’s net debt to EBITDA ratio is expected to be 0.7x in 2027, providing flexibility in capital allocation.

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