GE Aerospace Stock Gains After Earnings Report

GE Aerospace (GE) saw its stock increase by more than 4% by 11 a.m. ET on Wednesday. This rise came as investors viewed the company's recent earnings report through a positive lens, taking advantage of the dip in stock prices that followed the announcement on Tuesday.

Mixed Earnings Report

The earnings report from GE Aerospace was somewhat mixed, with certain negative aspects, especially the lowered expectations for LEAP engine deliveries. LEAP engines are produced in a joint venture with Safran and are critical components for the Boeing 737 MAX and the Airbus A320 neo series.

Due to ongoing supply chain challenges and delays in aircraft deliveries, GE Aerospace now anticipates a 10% decline in LEAP engine deliveries for 2024 compared to 2023. Initially, the company had projected an increase of 20% to 25% in LEAP deliveries at the start of the year.

This reduction in LEAP deliveries is concerning as it may push earnings further out, delaying cash flow that GE typically receives for engine servicing, known as aftermarket revenue.

Positive Aspects of the Report

Despite the disappointing LEAP engine delivery news, there are silver linings. Orders in the commercial engine segment rose by 29% and in the defense sector by 19% during the third quarter. Additionally, the delays in aircraft deliveries are expected to lead to greater usage of GE’s older engines, which could enhance their aftermarket revenues.

For instance, management indicated that visits for the overhaul of the older CFM56 engine, which services legacy Airbus A320s and Boeing 737s, are expected to peak in 2025 and remain at that peak until 2027. Previous forecasts anticipated a decline post-2025.

This upward adjustment in expectations for immediate earnings and cash flow may counterbalance the projected deferred earnings and cash flow impacts in the coming years. Such factors could be what the market overlooked during the knee-jerk reaction that followed Tuesday's report.

Author has no positions in any of the stocks mentioned.

GE, Aerospace, Earnings