GE Aerospace Is Making a $12 Billion Acquisition. Here's What Investors Should Know.
Key Points
GE Aerospace's stock has fallen more than 11% in the past month.
The acquisition of Consolidated Precision Products will likely face regulatory scrutiny amid antitrust concerns.
GE Aerospace's backlog is more than $200 billion and stretches into the next decade.
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GE Aerospace (NYSE: GE) announced this week that it is acquiring Consolidated Precision Products (CPP) for $11.75 billion. This is GE Aerospace's largest acquisition since it became a stand-alone company in 2024. The purchase will affect the company's balance sheet in the near term, so what do investors need to know?
First, supply chain constraints have made it difficult for companies like GE to keep pace with demand. CPP has supplied GE for many years and is one of just a handful of companies that are global suppliers of aerospace castings. It supplies approximately 25% of GE's needs. Thus, it makes sense that GE would want to bring the business fully under its umbrella. It makes the supply chain more difficult for competition while loosening a known bottleneck for its own manufacturing.
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The deal will be financed with $7 billion in cash and the remainder through new debt. GE expects CPP to generate approximately $2 billion in revenue in 2027. The acquisition will, however, face antitrust scrutiny and concerns over fair competition. Still, if this deal goes through, it should boost adjusted profit per share and free cash flow even in the first year, according to GE.
GE Aerospace's backlog reaches into the 2030s. It must secure sufficient capacity to meet contracted obligations. Purchasing CPP streamlines operations and fixes a serious supply chain issue. It's a steep price to pay now, but it should pay off over the coming years.
GE Aerospace's stock has risen just 5% in 2026, and a recent pullback has created a more favorable entry point. The stock is still trading at a premium, with forward and trailing P/E ratios approaching 40 and a PEG ratio above 4.
Ultimately, I believe this acquisition solves a necessary issue. The short-term pain from the high cost of CPP will be more than offset by the additional capacity GE Aerospace will create for itself. The company's $210 billion backlog provides incredible revenue visibility, and GE's main risk is executing without delay. This acquisition will help ensure just that.
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Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends GE Aerospace. The Motley Fool has a disclosure policy.
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