GE Aerospace Earnings: Fantastic Prospects for Stand-Alone Jet Engine Maker

Key Morningstar Metrics for GE Aerospace

• Fair Value Estimate: $167.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of GE Aerospace’s Earnings

GE Aerospace GE reported its latest quarterly results to include operations with the recently spun-off wind and power businesses of GE Vernova GEV. Management’s discussion (and our analysis)_ focused on the stand-alone commercial and military jet engine and propulsion business, and we see great prospects.

Incorporating updated near-term guidance from company management and our longer-term estimate of the sheer mountain of profits the company stands to earn from servicing more than 70,000 of its engines in flight today, we have adjusted our fair value estimate to $167 from $152. We also increased our medium-term forecast for outlays on research and development to deliver next-generation narrow-body and fighter jet engines to market, offset by a slight increase in longer-term profit growth, as many of the company’s products will be in service and generating aftermarket profit for decades.

Having paid over $100 billion in debt since 2018 and restructured and pared down its many businesses, the GE of yesteryear is no more. We believe GE Aerospace was always the crown jewel of the GE portfolio. As the preeminent manufacturer of jet engines globally, the firm has promising growth prospects and industry-leading operating margins approaching 20%.

Commercial aerospace products in general, and commercial jet engines in particular, face very robust demand. Over the next 20 years, we expect the global commercial fleet to grow by nearly 20,000 aircraft (most narrow-bodies powered by the CFM Leap engine), including net growth as more markets connect to the air travel network and demand replacements of older, less efficient aircraft. Between deliveries and eventual servicing of the Leap and ongoing profit flows from GE’s fleet of engines powering wide-bodies, we forecast over $85 billion in free cash flow to GE Aerospace over the coming decade, most of which we anticipate the company will distribute to shareholders.