Analyzing GE Aerospace (NYSE:GE) and Embraer-Empresa Brasileira de Aeronautica (NYSE:ERJ)

Embraer-Empresa Brasileira de Aeronautica (NYSE:ERJ) and GE Aerospace (NYSE:GE) are both large-cap aerospace companies, but which is the better stock? We will compare the two companies based on the strength of their valuation, profitability, institutional ownership, earnings, dividends, risk and analyst recommendations.

Volatility and Risk

Embraer-Empresa Brasileira de Aeronautica has a beta of 1.76, suggesting that its share price is 76% more volatile than the S&P 500. Comparatively, GE Aerospace has a beta of 1.44, suggesting that its share price is 44% more volatile than the S&P 500.

Institutional and Insider Ownership

34.7% of Embraer-Empresa Brasileira de Aeronautica shares are owned by institutional investors. Comparatively, 74.8% of GE Aerospace shares are owned by institutional investors. 1.0% of Embraer-Empresa Brasileira de Aeronautica shares are owned by insiders. Comparatively, 0.2% of GE Aerospace shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Dividends

Embraer-Empresa Brasileira de Aeronautica pays an annual dividend of $0.05 per share and has a dividend yield of 0.1%. GE Aerospace pays an annual dividend of $1.44 per share and has a dividend yield of 0.5%. Embraer-Empresa Brasileira de Aeronautica pays out 2.4% of its earnings in the form of a dividend. GE Aerospace pays out 20.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. GE Aerospace has increased its dividend for 2 consecutive years. GE Aerospace is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of current ratings and target prices for Embraer-Empresa Brasileira de Aeronautica and GE Aerospace, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Embraer-Empresa Brasileira de Aeronautica	1	0	4	2	3.00
GE Aerospace	0	1	10	0	2.91

Embraer-Empresa Brasileira de Aeronautica presently has a consensus target price of $54.6667, suggesting a potential downside of 5.57%. GE Aerospace has a consensus target price of $232.9167, suggesting a potential downside of 13.24%. Given Embraer-Empresa Brasileira de Aeronautica’s stronger consensus rating and higher probable upside, analysts clearly believe Embraer-Empresa Brasileira de Aeronautica is more favorable than GE Aerospace.

Profitability

This table compares Embraer-Empresa Brasileira de Aeronautica and GE Aerospace’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Embraer-Empresa Brasileira de Aeronautica	5.43%	13.38%	3.92%
GE Aerospace	18.64%	31.32%	4.86%

Valuation & Earnings

This table compares Embraer-Empresa Brasileira de Aeronautica and GE Aerospace”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Embraer-Empresa Brasileira de Aeronautica	$6.39 billion	1.66	$352.50 million	$2.05	28.24
GE Aerospace	$38.70 billion	7.36	$6.56 billion	$7.17	37.44

GE Aerospace has higher revenue and earnings than Embraer-Empresa Brasileira de Aeronautica. Embraer-Empresa Brasileira de Aeronautica is trading at a lower price-to-earnings ratio than GE Aerospace, indicating that it is currently the more affordable of the two stocks.

Summary

GE Aerospace beats Embraer-Empresa Brasileira de Aeronautica on 12 of the 18 factors compared between the two stocks.

About Embraer-Empresa Brasileira de Aeronautica

Embraer S.A. designs, develops, manufactures, and sells aircraft and systems in North America, Latin America, the Asia Pacific, Brazil, Europe, and internationally. The company operates through Commercial Aviation; Defense & Security; Executive Aviation; Services & Support; and Other segments. The Commercial Aviation segment designs, develops, manufactures, and sells commercial jets, as well as leases aircraft. The Defense & Security segment engages in the research, development, production, modification, and support for military defense and security aircraft; and offers a range of products and integrated solutions that include radars, special space systems, and cyber security solutions, as well as information and communications systems comprising command, control, communications, computer, intelligence, surveillance, and reconnaissance systems. The Executive Aviation segment develops, produces, and sells executive jets. This segment also leases Phenom family executive jets in the entry jet and light jet categories; and Praetor 500 and Praetor 600, disruptive executive jets in the midsize and super midsize categories. The Service & Support segment provides after-service solutions and support services; maintenance, repair, and overhaul services for commercial, executive, and defense aircraft; and aircraft components and engines. This segment also supplies steel and composite aviation structures to various aircraft manufacturers. The Other segment engages in the supply of fuel systems, structural parts, and mechanical and hydraulic systems; and production of agricultural crop-spraying aircraft. The company was formerly known as Embraer-Empresa Brasileira de Aeronáutica S.A. and changed its name to Embraer S.A. in November 2010. Embraer S.A. was incorporated in 1969 and is headquartered in São Paulo, Brazil.

About GE Aerospace

GE Aerospace (also known as General Electric) is a company that specializes in providing aerospace products and services. It operates through two reportable segments: Commercial Engines and Services and Defense and Propulsion Technologies. It offers jet and turboprop engines, as well as integrated systems for commercial, military, business, and general aviation aircraft. GE demerged into GE Vernova, GE Aerospace, and GE Healthcare.