Which of These Aerospace Stocks Will Fly Highest? – General Electric Company (GE), The Boeing Company (BA), United Technologies Corporation (UTX)

A cause for concern

United Technologies Corporation (NYSE:UTX)’s balance sheet has $21 billion in long-term debt, which shouldn’t be unexpected for an industrial company with a lot of long-term assets. The company’s long-term debt to equity ratio of 83% is concerning, and is something that you should keep an eye on. By contrast, The Boeing Company (NYSE:BA) is conservatively capitalized, with more than $10 billion in cash and equivalents on the balance sheet, compared with only $9 billion in long-term debt.

General Electric Company (NYSE:GE), meanwhile, has a balance sheet that should give all investors pause. GE has more than $77 billion in cash and equivalents on the books, which is surely a huge sum, but that figure decreased by $7 billion over the past year. Furthermore, General Electric has a whopping $236 billion in long-term debt. The company only has $128 billion in shareholder equity. General Electric is a profitable business, but this huge level of debt should have investors concerned.

GE isn’t expensive, at a price-to-earnings ratio of 18, but because of its huge level of debt, the company is highly leveraged and extremely vulnerable to economic downturns (see 2008-2009). In the future, investors who favor a clean balance sheet will do themselves a favor to monitor GE’s capital structure very closely. Interest rates currently sit at historic lows, but that won’t last forever. At some point, rates will rise, making refinancing a daunting task going forward.

As a result, while General Electric Company (NYSE:GE) is an American business icon with a long operating history and a diversified portfolio of businesses, I’m extremely concerned by the amount of debt the company carries. United Technologies Corporation (NYSE:UTX) and The Boeing Company (NYSE:BA) are in better financial condition, and both trade for more attractive price-to-earnings ratios of 16, with dividend yields north of 2%.  These two should be given preference if you’re an investor looking to diversify into the aerospace industry.

The article Which of These Aerospace Stocks Will Fly Highest? originally appeared on Fool.com and is written by Robert Ciura.

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