Where Will GE Aerospace Be in a Year?

Core Viewpoint - GE Aerospace's fourth-quarter and full-year 2024 earnings significantly exceeded expectations, indicating strong operational performance and growth potential for the company moving forward [2][4]. Financial Performance - The full-year operating profit for the commercial engines and services (CES) segment was $7.1 billion, surpassing the guidance of $6.6 billion to $6.8 billion [2]. - In the fourth quarter, GE Aerospace achieved an operating income of $2.2 billion, exceeding the implied guidance of $1.7 billion to $1.9 billion [3]. - The defense and propulsion technologies (DPT) segment reported a full-year operating profit of $1.1 billion, also above the previous guidance of $1 billion to $1.3 billion [3]. Future Projections - By the end of 2025, GE Aerospace is projected to grow earnings by 14.7%, trading at 37 times earnings and slightly less than 34 times free cash flow (FCF) [5]. - Management anticipates operating profit between $7.8 billion to $8.2 billion for 2025, adjusted earnings per share (EPS) of $5.10 to $5.45, and free cash flow of $6.3 billion to $6.8 billion [9]. Growth Drivers - The company is expected to benefit from long-term revenue streams from higher-margin services and aftermarket sales of its airplane engines, maintaining its position as a dominant player in the commercial engine market [7]. - The joint venture with Safran, CFM International, is crucial as it produces engines that are widely used in the industry, with a shift in installed base from CFM56 to LEAP engines expected to enhance services revenue [8]. Operational Insights - LEAP services became profitable in 2024, with expectations for breakeven in 2025 and original equipment profitability following in 2026 [10]. - Management forecasts a 15% to 20% increase in LEAP deliveries in 2025, with engine volume growth in the high teens, indicating a positive outlook despite concerns over negative engine mix [11]. Overall Outlook - GE Aerospace is positioned for mid-teens earnings growth in the coming year, with a strong outlook for LEAP deliveries and expanding profitability in services [12].