Core Viewpoint - GE Aerospace reported strong fourth-quarter earnings and revenue that exceeded analyst expectations, despite a decline in share price during the trading day [1] Group 1: Fourth-Quarter Performance - Adjusted earnings per share for the fourth quarter were $1.57, surpassing the consensus estimate of $1.43 [1] - Revenue for the fourth quarter reached $11.87 billion, exceeding the $11.2 billion consensus estimate [1] - Adjusted earnings increased by 19% year over year, while adjusted revenue rose by 20% compared to the same quarter last year [1] Group 2: Full-Year 2025 Results - For the full year 2025, adjusted earnings per share were $6.37, up 38% year over year [2] - Adjusted revenue increased by 21% to $42.3 billion [2] - Free cash flow climbed by 24% to $7.7 billion, with conversion exceeding 100% [2] Group 3: Future Outlook for 2026 - GE Aerospace forecasts earnings per share for 2026 to be between $7.10 and $7.40, with the midpoint exceeding analyst estimates of $7.12 [3] - The company noted continued strength in both commercial and defense markets, with commercial engine deliveries increasing by 25% in 2025 [3] - LEAP engine deliveries rose by 28%, while defense deliveries grew by 30% [3] Group 4: Order Backlog - Fourth-quarter orders totaled $27 billion, representing a 74% increase from the prior year [2] - This growth in orders is expected to expand the company's backlog and support future growth prospects [2]

Core Insights - GE Aerospace reported strong fourth-quarter 2025 results, with revenues and earnings exceeding expectations, following its spin-off from General Electric in April 2024 [1][2] Financial Performance - Adjusted earnings for Q4 were $1.57 per share, surpassing the Zacks Consensus Estimate of $1.44, reflecting a 19% year-over-year increase [2][8] - Total revenues reached $12.7 billion, an 18% increase year-over-year, with adjusted revenues at $11.87 billion, up 20% year-over-year, beating the consensus estimate of $11.26 billion [2][3] - For the full year 2025, adjusted revenues were $42.3 billion, a 21% increase year-over-year, and adjusted earnings were $6.37 per share, up 38% year-over-year [3] Segment Performance - Revenues from the Commercial Engines & Services segment increased by 24% year-over-year to $9.47 billion, driven by higher shop visit work, spare parts, and favorable pricing, with total orders rising 76% to $22.8 billion [4] - The Defense & Propulsion Technologies segment reported revenues of $2.84 billion, a 13% increase year-over-year, with total orders up 61% to $4.57 billion [5] Cost and Margin Analysis - Cost of sales surged 23.7% year-over-year to $8.36 billion, while selling, general, and administrative expenses decreased by 13.8% to $997 million [6] - Research and development expenses rose 16.4% to $448 million, with operating profit (non-GAAP) at $2.3 billion, a 14% increase year-over-year, resulting in a margin of 19.2%, down 90 basis points year-over-year [6] Balance Sheet and Cash Flow - At the end of Q4 2025, GE Aerospace had cash and cash equivalents of $12.4 billion, down from $13.6 billion at the end of December 2024, with long-term borrowings increasing to $18.8 billion from $17.2 billion [7] - Adjusted free cash flow for Q4 was $1.76 billion, compared to $1.53 billion in the same quarter last year [9] Future Outlook - For 2026, GE expects low-double-digit revenue growth, with operating profit estimated between $9.85 billion and $10.25 billion, and adjusted earnings projected to be between $7.10 and $7.40 per share [10] - Free cash flow is anticipated to be in the range of $8.0 billion to $8.4 billion, with a conversion rate of over 100% [10] - The Commercial Engines & Services segment is expected to grow in the mid-teens range, while the Defense & Propulsion Technologies segment is projected to increase in the mid-to-high single-digit range [11]

Core Viewpoint - GE Aerospace reported better-than-expected fourth-quarter financial results and provided an optimistic FY26 EPS outlook, despite shares trading lower on the day of the announcement [1]. Financial Performance - The company guided for adjusted EPS of $7.10 to $7.40 for 2026, slightly above the $7.12 estimate, and projected free cash flow of $8.0 billion to $8.4 billion, with an adjusted effective tax rate below 17% and no planned debt repayment [1]. - GE Aerospace's fourth-quarter adjusted EPS was $1.57, exceeding Bank of America's estimate of $1.39 and Bloomberg's estimate of $1.44 [2]. - Revenues for the quarter reached $11.865 billion, surpassing Bank of America's estimate of $11.25 billion and Bloomberg's estimate of $11.236 billion [3]. Segment Performance - The Commercial Engines & Services segment generated $9.468 billion, beating Bank of America's estimate of $9.031 billion, driven by a 31% year-over-year increase in Services revenue due to higher shop visit volumes and spares output [3]. - The Defense & Propulsion Technologies segment reported $2.839 billion in revenue, above Bank of America's forecast of $2.628 billion, with Defense revenue up 2% despite a 7% volume decline, and Propulsion revenue rising 33% due to increased Avio volumes [4]. Analyst Insights - Bank of America analyst Ronald J. Epstein maintained a Buy rating on GE Aerospace with a price forecast of $365, citing strong fourth-quarter results driven by higher-than-expected revenue and margins [2]. - Epstein noted that GE Aerospace's 2026 outlook for revenue and adjusted EPS is favorable compared to Bank of America's estimates [4]. Stock Performance - GE Aerospace shares were down 5.52% at $305.81 at the time of publication [5].

About this content About Emily Jarvie Emily began her career as a political journalist for Australian Community Media in Hobart, Tasmania. After she relocated to Toronto, Canada, she reported on business, legal, and scientific developments in the emerging psychedelics sector before joining Proactive in 2022. She brings a strong journalism background with her work featured in newspapers, magazines, and digital publications across Australia, Europe, and North America, including The Examiner, The Advocate, ...

Core Insights - GE Aerospace reported quarterly earnings of $1.57 per share, exceeding the Zacks Consensus Estimate of $1.44 per share, and showing an increase from $1.32 per share a year ago, resulting in an earnings surprise of +9.29% [1] - The company achieved revenues of $11.87 billion for the quarter ended December 2025, surpassing the Zacks Consensus Estimate by 5.38%, and up from $9.88 billion year-over-year [2] Earnings Performance - Over the last four quarters, GE has consistently surpassed consensus EPS estimates, achieving this four times [2] - The company also topped consensus revenue estimates in all four quarters during the same period [2] Stock Performance - GE shares have increased approximately 3.4% since the beginning of the year, outperforming the S&P 500, which gained 0.4% [3] Future Outlook - The company's earnings outlook will be crucial for determining the stock's immediate price movement, with current consensus EPS estimates at $1.61 for the coming quarter and $7.02 for the current fiscal year [4][7] - The Zacks Rank for GE is currently 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Aerospace - Defense industry, to which GE belongs, is currently ranked in the top 40% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Financial Data and Key Metrics Changes - In Q4 2025, orders increased by 74%, revenue grew by 20%, and EPS rose by 19% to $1.57, with free cash flow up 15% [5][17] - For the full year, orders were up 32%, revenue increased by 21%, operating profit grew by $1.8 billion, and free cash flow rose by $1.5 billion [5][18] - Operating profit for the year was $9.1 billion, with margins expanding by 70 basis points to 21.4% [18] Business Line Data and Key Metrics Changes - In the Commercial Engine Services (CES) segment, orders were up 35% and revenue grew by 24%, with services orders up 27% and revenue up 26% [5][20] - In the Defense and Power Technologies (DPT) segment, orders increased by 19% and revenue was up 11%, with profit rising by 22% to $1.3 billion [5][21] Market Data and Key Metrics Changes - The company reported a backlog of approximately $190 billion, up nearly $20 billion from the previous year [7] - The installed base of engines is 80,000, with over 2.3 billion flight hours accumulated [27][28] Company Strategy and Development Direction - The company aims for substantial revenue, EPS, and cash growth in 2026, with expectations for revenue to increase in low double digits and operating profit to reach $9.85 billion to $10.25 billion [7][8] - Investments are being made in U.S. manufacturing to support both commercial and defense customers, with a focus on improving time on wing and reducing cost of ownership [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand environment, citing robust orders and a strong backlog as indicators of future performance [32][33] - The company is focused on continuous improvement and leveraging technology to enhance customer value and operational efficiency [28][29] Other Important Information - The company is transitioning its segment reporting to reflect organizational changes, with aeroderivative engines moving from CES to DPT [22][23] - The company plans to invest approximately $500 million in MRO to support LEAP engine capacity expansion [11] Q&A Session Summary Question: Can you elaborate on the commercial aftermarket backdrop? - Management noted strong momentum in services growth and expressed confidence in achieving mid-teens growth in 2026, driven by increased work scopes and pricing [31][32] Question: What is the profitability outlook for LEAP engines? - Management confirmed that LEAP original equipment is expected to be profitable in 2026, with improvements in supply chain visibility and readiness [40][44] Question: How are turnaround times improving for mature engines? - Management indicated that improvements in turnaround times are driven by better material availability and efficient execution on the shop floor, which enhances productivity [48][50] Question: What are the implications of the agreement with FTAI? - The agreement is aimed at enhancing third-party aftermarket options, which supports asset values and lowers costs of ownership for customers [93] Question: What is the expected cash flow outlook for 2026? - Management indicated that there are no abnormal cash flow expectations for 2026, with a focus on managing inventory growth and contract assets [94][95]

Core Viewpoint - GE Aerospace CEO Larry Culp defended the jet-engine industry's pricing practices in response to complaints from the airline industry regarding high maintenance costs and engine shortages impacting their operations [1] Group 1: Industry Pricing Practices - The jet-engine industry faces criticism from airlines over rising maintenance costs, which are perceived as excessive [1] - Culp emphasized that pricing practices are necessary to ensure the sustainability and innovation within the jet-engine sector [1] Group 2: Impact on Airlines - Airlines are experiencing strain due to engine shortages, which are exacerbating operational challenges and increasing costs [1] - The ongoing issues with maintenance and engine availability are leading to heightened concerns among airline operators [1]

Financial Data and Key Metrics Changes - In Q4 2025, orders increased by 74%, revenue grew by 20%, and EPS rose by 19% to $1.57, with free cash flow up 15% [5][17] - For the full year, orders were up 32%, revenue increased by 21%, operating profit grew by $1.8 billion, and free cash flow rose by $1.5 billion [5][18] - Operating profit for the year was $9.1 billion, with margins expanding by 70 basis points to 21.4% [18] Business Line Data and Key Metrics Changes - In the Commercial Engine Services (CES) segment, orders were up 35%, revenue grew by 24%, and profit increased by 26% to $8.9 billion [5][19] - In the Defense and Power Technologies (DPT) segment, orders increased by 19%, revenue grew by 11%, and profit rose by 22% to $1.3 billion [5][20] Market Data and Key Metrics Changes - The backlog reached approximately $190 billion, up nearly $20 billion from the previous year [6] - The installed base of LEAP engines is expected to triple between 2024 and 2030, with significant capacity expansions planned across the global MRO network [10][11] Company Strategy and Development Direction - The company aims for substantial revenue, EPS, and cash growth in 2026, with expectations for revenue to increase in the low double digits [6][24] - Investments are being made in U.S. manufacturing to support both commercial and defense customers, with a focus on improving time on wing and reducing cost of ownership [7][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand environment, citing robust orders and a strong backlog as indicators of future growth [30][31] - The company is focused on leveraging its extensive installed base and R&D investments to drive continuous improvement and customer value [26][72] Other Important Information - The company is transitioning its segment reporting to reflect organizational changes, with no impact on total company metrics [22] - A significant portion of R&D spending is directed towards improving customer experience and developing next-generation technologies [71] Q&A Session Summary Question: Can you elaborate on the commercial aftermarket backdrop? - Management noted that there are no concerns about demand momentum continuing into 2026, supported by a strong backlog and expected growth in shop visits and spare parts [30][31] Question: What is the status of LEAP profitability? - Management confirmed that LEAP original equipment is expected to be profitable in 2026, aligning with previous plans [41] Question: How are turnaround times improving for mature engines? - Improvements in turnaround times are driven by better material availability and efficient execution on the shop floor, leading to increased productivity [44] Question: What are the expected losses from the GE9X program? - Losses for the GE9X program were around a couple of hundred million in 2025, with expectations for these losses to double in 2026 [48] Question: How is R&D spending allocated? - R&D spending focuses on enhancing customer experience, developing new technologies, and supporting next-generation defense programs [71]

Financial Data and Key Metrics Changes - In Q4 2025, orders increased by 74%, revenue grew by 20%, and EPS rose by 19% to $1.57, with free cash flow up 15% [4][14] - For the full year, orders were up 32%, revenue increased by 21%, operating profit grew by $1.8 billion, and free cash flow rose by $1.5 billion [4][15] - Operating profit for Q4 was $2.3 billion, up 14%, while for the full year, it reached $9.1 billion, a 25% increase [14][15] Business Line Data and Key Metrics Changes - In the Commercial Engines Services (CES) segment, orders were up 76% in Q4, with revenue increasing by 24% and services revenue up 31% [15][16] - In the Defense and Power Technologies (DPT) segment, orders increased by 61%, with revenue growing by 13% [17] - CES profit grew by 5% to $2.3 billion, while DPT profit was $1.3 billion, with margins up 110 basis points to 12.3% [16][18] Market Data and Key Metrics Changes - The backlog increased to approximately $190 billion, up nearly $20 billion from the previous year [5] - The installed base of LEAP engines is expected to triple between 2024 and 2030, driving aftermarket demand [9] - The defense book-to-bill ratio was above 2, indicating strong demand in the defense sector [17] Company Strategy and Development Direction - The company is focused on enhancing customer experience and operational efficiency through the integration of technology and operations [7][24] - Investments of approximately $500 million are being allocated to expand MRO capacity, particularly for LEAP engines [9] - The company aims for mid-teens revenue growth in 2026, with a focus on both commercial and defense sectors [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in robust demand for 2026, supported by a strong backlog and favorable market conditions [25][27] - The company anticipates generating $8-$8.4 billion in free cash flow in 2026, with conversion rates remaining above 100% [6][22] - Management highlighted the importance of continuous improvement and innovation to maintain competitive advantages in the industry [24][49] Other Important Information - The company is transitioning its segment reporting to better align with organizational changes, impacting revenue and profit allocations [20] - R&D spending remains a priority, with approximately $3 billion allocated annually to drive innovation and improve product offerings [48] Q&A Session Summary Question: Can you elaborate on the commercial aftermarket backdrop? - Management noted strong momentum in the aftermarket, with expectations for mid-teens services growth in 2026, driven by increased work scopes and pricing [25][27] Question: What is the profitability outlook for LEAP engines? - Management confirmed that LEAP original equipment is expected to be profitable in 2026, with improvements in supply chain visibility and readiness [30][32] Question: How are turnaround times improving across engine platforms? - Improvements in turnaround times are attributed to better material availability and efficient execution of standard work on the shop floor [34] Question: What are the expected losses from the GE9X program? - Losses for the GE9X program are expected to double year-over-year in 2026, consistent with prior guidance [36] Question: How is the company managing R&D investments? - R&D investments are focused on enhancing customer experience and developing next-generation technologies, with a commitment to maintaining spending levels [48][49]

Investment Rating - The report maintains a recommendation for the commercial aviation engine industry, indicating a positive investment outlook [1]. Core Insights - The commercial aviation engine is referred to as the "crown jewel" of modern industry, with engines accounting for approximately 25% of the total value of commercial aircraft [4][20]. - The report emphasizes the significant growth potential of China's commercial aviation engine market, projecting a total market size exceeding 2.6 trillion yuan over the next 20 years, with an annualized scale of over 130 billion yuan [5][11]. - The commercial aviation engine supply chain is characterized by high barriers to entry, with a global oligopoly dominated by a few major manufacturers [5][6]. Summary by Sections Industry Overview - The report introduces the commercial aviation engine as a critical component of modern industrial capabilities, highlighting China's reliance on imported engines and the low marketization rate of domestic engines, which is less than 1% [4][21]. Commercial Aviation Engine Analysis - The structure of commercial aviation engines includes key components such as fans, compressors, combustion chambers, and turbines, with the hot section being the most critical and challenging to manufacture [26][33]. - The aftermarket services for engines can generate revenues up to four times the initial sale price, indicating a lucrative long-term profit potential [4][18]. Business Model Exploration - The primary manufacturers operate under a "super blade + long-term blade" profit model, leveraging significant discounts on initial sales to capture market share while securing long-term service contracts for profitability [5][6]. - Suppliers in the engine manufacturing chain are positioned as "hidden champions," benefiting from high entry barriers and the need for extensive certification processes [5][6]. Global Valuation Perspective - The average price-to-earnings (PE) ratio for major engine manufacturers is reported at 30.2 times, with leading companies like GE Aerospace at 42 times, indicating robust valuation metrics driven by order backlog and aftermarket growth [5][6]. - Core suppliers exhibit an even higher average PE of 68.5 times, reflecting their scarcity and stable demand characteristics [5][6]. China's Commercial Aviation Engine Market - The report highlights the Longjiang series of engines as a key initiative to reduce reliance on foreign technology and enhance domestic capabilities [5][11]. - The projected growth of the Chinese aviation market is supported by forecasts indicating a compound annual growth rate (CAGR) of 4.4% from 2024 to 2044, with expectations of 10,175 aircraft by 2044 [5][11]. Investment Recommendations - The report suggests focusing on three key areas within the domestic aviation engine supply chain: core component suppliers, high-temperature alloy manufacturers, and raw material suppliers [5][11].