GE Will be Allowed to Export Its Jet engines to China

February 20, 2020
359 Views

General Electric Co. (NYSE: GE), is reportedly about to receive permission to continue exporting its jet engines to aerospace manufacturers in China. The company, one of the largest jet engine makers in the world, was at risk of losing approval as U.S. trade officials continue to fight with China over the theft of intellectual property.

The Wall Street Journal recently reported that the Trump administration would block sales of GE LEAP 1C jet engines to China, due to fears that the designs could be reverse engineered by Chinese firms.

GE has struggled to turn a profit and grow sales in recent years. It has shed major divisions, cut worker pensions, and engaged in other significant cost-cutting measures. GE Aviation, the division that oversees jet engine production and other technologies, is the company’s most profitable business segment.

Losing the ability to export its engines to China would have been a huge hit to GE. It is already losing revenue due to the grounding of Boeing 737 MAX jets, which exclusively use engines made by CFM International, a GE joint venture with French firm Safran Aircraft Engines.

President Trump Doesn’t Want to Disrupt American Businesses

The news that GE would receive ongoing approval was revealed by CNN, which reported it had received the information from a Washington insider.

This information aligns with comments recently made by President Trump on Twitter.

He told his followers that his government didn’t want to harm American companies under the guise of the “always used National Security excuse.” Trump said that “We don’t want to make it impossible to do business with us. That will only mean that orders will go to someplace else. As an example, I want China to buy our jet engines, the best in the world.”

Is GE Worth Buying Today?

GE stock is considered by many to be a bargain in today’s market, trading for less than $13. It has strong momentum behind it, having grown 13.16% in the year to date, and 30.98% over the last 12 months. The company’s cost cutting measures are yet to have a major impact on the bottom line, but it was still operating with a 26.45% gross profit margin when it reported full-year results for 2019.

The dividend is negligible, but price growth could create strong returns for investors. When the Boeing 737 MAX jets are recertified for flight (expected this year), there could be a significant upside for revenue and earnings.

The latest news surrounding exports to China could give new confidence to investors, and the low point of entry on the stock could make it ideal for a cautious pick in a wider portfolio.

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