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GE’s GE9X Engine For Boeing’s New 777X Jet Gets US Certification
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GE’s GE9X Engine For Boeing’s New 777X Jet Gets US Certification

General Electric announced that its aviation unit received certification by the US Federal Aviation Administration (FAA) for its GE9X engine to be used in the Boeing 777X, in what marks a key milestone in the journey to roll out the new twin-engine aircraft.

GE (GE) said that the FAR (Federal Aviation Regulation) Part 33 certification involved 8 test engines. The GE9X test engines completed just under 5,000 hours and 8,000 cycles for certification. GE disclosed that it has received orders and commitments for more than 600 GE9X engines. In addition, 8 GE9X test engines and 2 test spares have been produced and delivered to Seattle for 4 of Boeing’s 777X test airplanes. Shares in Boeing jumped 6.5%, while GE rose 1.4% on Monday.

“There is no substitute that can achieve the combination of size, power and fuel efficiency of the GE9X,” GE Aviation John Slattery said. “This engine will deliver unsurpassed value and reliability to our airline customers. I want to congratulate the entire GE9X team and thank Boeing, our partners and suppliers for the collaboration on this incredible achievement.”

The GE9X engine is designed to achieve 10% lower specific fuel consumption (SFC) compared to the GE90-115B and 5% better SFC than any other engine in its class. The engine will also operate with less smog-causing emissions than any other engine in its class, the company said. 

Earlier this month, GE’s CEO Larry Culp disclosed that he expects to see positive industrial free cash flow (FCF) in the second half of 2020. In addition, the company is making “good progress” in reducing costs by $2 billion and generating cash savings of $3 billion to cope with the coronavirus pandemic, Culp said. (See GE’s stock analysis on TipRanks).

Following the comments, RBC Capital analyst Deane Dray reiterated a Buy rating on the stock with a $9 price target (45% upside potential).

“Consistent with recent peer updates, GE is seeing broadly improving activity in its end markets, or at a minimum, some signs of stabilization, such as in Aviation,” Dray wrote in a note to investors. “This news is a relief for investors as there had been growing doubts about the company’s ability to achieve this target after the lack of specifics provided during [second-quarter] earnings.”

The rest of the Street is cautiously optimistic on the stock. The Moderate Buy analyst consensus rating is split between 5 Buys and 6 Holds. With shares down 44%, the $7.98 average price target indicates investors could be reaping a 29% gain in the shares in the next 12 months.

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