Skip to Content
Morningstar

GE Earnings: Solid Results Driven By Aerospace

We are raising our fair value estimate of GE’s stock after results.

The General Electric logo appears above a trading post on the floor of the New York Stock Exchange.

Key Morningstar Metrics for General Electric

What We Thought of General Electric’s Earnings

General Electric’s GE fourth-quarter and full-year results marginally beat our expectations on most metrics except free cash flow, mostly due to the firm carrying greater inventory than we expected. Consequently, we’ve lifted our fair value estimate by 4% to $128, though over half of that is due to the time value of money. However, we expect to reevaluate further as GE issues additional filings, including its 10-K.

Unsurprisingly, commercial aerospace continues to drive performance at the firm. Total aerospace drove about three-fourths of profitability during the quarter, thanks mostly to a 23% year-on-year increase in services. Encouragingly, demand remains strong here, with the segment boasting a book/bill (orders divided by revenue) of over 1.2 times. Despite a slowing macroeconomic environment affecting shorter-cycled industrials, the slowdown hasn’t reached here.

We think GE’s runway will continue for some time. Departures keep rising as we head into 2024, and GE is still playing catchup with its shop visits, which should grow in the low double digits to mid-teens. Scope and pricing should drive the rest of our near-term forecast, though growth in spares should begin to moderate. In the longer term, we expect this business to remain strong, particularly since it’s more of a cycles-driven than departures-driven business, as narrow-body aircraft get more wear and tear over time.

By management’s admission, leap deliveries will likely come below the just over 2,000 we were expecting. However, this should help aerospace margins, as equipment is a headwind there. Nonetheless, we don’t expect that GE will crack 20% operating margins in aerospace this year, given the considerable ramp. Wide-body 9x engines also ramp in 2025, so we think incremental margins in the low 20s will remain the norm over the medium term.

General Electric Stock Price

Data as of Source: Morningstar Direct.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

More in Stocks

About the Author

Joshua Aguilar

Director of Equity Research, Resources
More from Author

Joshua Aguilar is the director of resources equity research for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

Aguilar joined Morningstar in 2016 as an associate on the financials team, and he was promoted to analyst on the industrials team in 2018 and to senior analyst in 2022. He has served as associates coordinator since 2021 and led Morningstar's diversity efforts as DEI co-chair since 2020. Aguilar has been a mentor to several associates on their paths to becoming analysts. He also has hosted a Morningstar earnings town hall, participated in analyzing Morningstar stock, and been a strong contributor through both client interactions and his General Electric stock call. Aguilar co-authored an Outstanding Research Achievement-winning piece with colleague Kris Inton on CEO compensation in 2021. He also has taught Morningstar's model to new hires for many years as part of the valuation committee.

Before joining Morningstar, Aguilar was a practicing business transactional attorney in Florida. He graduated magna cum laude with a bachelor's degree in political science and criminology from the University of Florida. He also has a Master of Business Administration from Rollins College and a Juris Doctor from Wake Forest University.

Sponsor Center