GE Aerospace Exceeds Expectations in Q3 but Faces Challenges Ahead

GE Aerospace (NYSE: GE) has announced its Q3 results, showing strong revenues and earnings that surpassed forecasts. The company posted revenues of $9.8 billion and adjusted earnings of $1.15 per share, exceeding both our expectations of $9.1 billion and $1.10, as well as the consensus estimates of $9.0 billion and $1.14 in earnings per share. This report highlights key takeaways from GE’s latest performance and its ongoing valuation.

Breaking Down Q3 Results

GE Aerospace reported revenue growth of 6% year-over-year (y-o-y), reaching $9.8 billion. The commercial engines and services sector saw significant growth with an 8% y-o-y increase to $7.0 billion, while defense and propulsion technologies rose by 2% to $2.2 billion. The company’s adjusted operating margin improved by 150 basis points y-o-y, now at 20.3%. The adjusted earnings of $1.15 represented a remarkable 25% increase compared to last year. In light of these results, GE raised its full-year earnings outlook to a range of $4.20 to $4.35, up from previous estimates of $3.95 to $4.20.

GE’s aftermarket business has been thriving, a trend anticipated to continue. The total order book increased by an impressive 28% y-o-y, totaling $12.6 billion. Despite these positive figures, GE still grapples with supply chain challenges and is likely to face repercussions from a recent union strike at Boeing.

Implications for GE Stock

Following the announcement of its Q3 results, GE stock experienced a 9% drop. The underperformance in the commercial engines and services segment fell short of expectations, leading to investor concerns about how the Boeing union strike might impact GE’s engine deliveries. Our analysis suggests that GE Aerospace’s Valuation stands at $197 per share, indicating limited growth potential from its current price of $182.

This year, GE stock has surged by 80%. The rally followed the company’s split from its healthcare business last year and the separation from its renewable energy and power division earlier this year. With these structural changes, GE Aerospace is projected to achieve strong earnings growth and maintain a solid balance sheet, fostering investor confidence.

However, over the past three years, GE stock’s performance has been inconsistent, with notable volatility compared to the S&P 500. In contrast, the Trefis High Quality (HQ) Portfolio—comprising 30 stocks—has shown less volatility and outperformed the S&P 500 each year during that same period. This portfolio tends to offer better returns with fewer risks, indicating a more stable investment option.

While GE’s stock appears to have limited upward movement potential, examining how GE Aerospace’s Peers perform across key metrics can provide additional insights. More comparative data can be found in Peer Comparisons.

[1] Returns as of 10/24/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.