Investing.com -- On Tuesday, S&P Global Ratings upgraded the long-term issuer credit rating of General Electric Co. (NYSE: GE ) to ’A-’ from ’BBB+’ due to improved credit metrics and robust demand in the aerospace sector. The firm also raised the issue-level ratings on GE’s unsecured debt to ’A-’ from ’BBB+’. The upgrade reflects GE’s solid operational performance and constructive financial policies, including moderate dividend growth and a measured pace of share repurchases.

The stable outlook from S&P Global Ratings is based on the anticipation that GE will maintain leverage below 2x, with strong commercial aerospace demand driving growth in new engine deliveries and higher-margin maintenance revenues. GE’s commercial segment reported a 13% revenue growth in 2024, despite lower engine deliveries, thanks to a strong services business. Analysts at S&P expect GE’s commercial engine unit deliveries to increase by at least 15% in 2025.

GE’s industry-leading profit margins have shown resilience, with aftermarket services and parts driving profitability. The widely used CFM56 engines and the growing market share of the new LEAP engine model contribute to recurring high-margin business. Despite the transition to new aircraft engine models, GE benefits from industry dynamics that favor its profitability, including the slower displacement of installed engines and older planes remaining in service longer.

The company has emerged as a stand-alone entity in a strong financial position after spinning off its health care and power businesses. At the end of 2024, GE had $13.6 billion in cash and approximately $19 billion in balance sheet debt. The company’s strong operating performance and favorable balance sheet position have resulted in credit measures consistent with the higher rating.

S&P Global Ratings expects GE to experience strong revenue growth, improving margins, and moderate capital spending requirements, leading to steady positive free operating cash flow. However, management’s guidance for 2025 suggests dividend and share repurchase levels may exceed free cash flow by around $2 billion, indicating that earnings and cash flow growth will primarily drive any improvement in credit measures.

The stable outlook is based on the expectation that GE will maintain its debt leverage below 2x in 2025, supported by ongoing strong demand in the commercial aerospace sector. While the ratings could be lowered if debt leverage significantly exceeds 2x due to weaker-than-expected operating results or more aggressive financial policies, a rating increase is possible if debt leverage sustains well below 1.5x, accompanied by a robust recovery in aerospace and conservative financial policies.

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