Summary of GE Aerospace FY Conference Call Company Overview - **Company**: GE Aerospace (NYSE: GE) - **Industry**: Aerospace and Defense - **Key Segments**: Commercial engines and services, Defense propulsion technologies Core Points and Arguments 1. **Market Leadership**: GE Aerospace has the largest engine install base in the industry with 78,000 engines, powering three out of every four commercial aircraft and two out of three U.S. combat aircraft [4][5] 2. **Revenue Composition**: In 2025, approximately 70% of revenue is expected to come from services, supported by a $175 billion backlog, primarily driven by the install base [5][6] 3. **Growth Projections**: - Services orders growth has increased by over 30% year-to-date, leading to a 25% growth in commercial services revenue [5][6] - Full-year outlook for commercial services has been raised to low to mid-20s growth, translating to an additional $1 billion in services revenue [6] - Defense propulsion technologies (DPT) revenue expectations have been increased to high single digits from mid-single digits [6][12] 4. **Operational Improvements**: The implementation of the FlightDeck operating model has improved material flow by over 30% year-over-year, enhancing operational efficiency and supplier performance [6][7][29] 5. **Future Outlook for 2026**: - Anticipated growth in air traffic and engine shop visits, with a projected double-digit increase in shop visits over 2025 [10][11] - LEAP engine deliveries expected to grow by 15%-20%, reaching around 2,000 engines [12][13] - Services growth is expected to normalize to a double-digit growth rate between 2024 and 2028 [12][16] 6. **LEAP Engine Performance**: - LEAP engines are achieving performance levels comparable to CFM56 engines, with expectations for improved durability and profitability in the coming years [18][20] - External shop visits for LEAP engines are projected to increase significantly, unlocking spare parts revenue [20][39] Additional Important Insights 1. **Supply Chain Management**: GE Aerospace has focused on improving transparency and communication with suppliers, which has been crucial for meeting demand and resolving issues [36][38] 2. **Defense Propulsion Technologies Growth**: - DPT has seen an 80% increase in defense engine shipments year-over-year, with a $19 billion backlog driving future growth [42][43] - Growth opportunities are identified in international markets and classified projects, with expectations for mid-single digit growth in DPT [47][48] 3. **Cultural Shift**: The FlightDeck initiative has transformed the company culture towards greater transparency and accountability, enhancing overall operational performance [29][34] Conclusion - GE Aerospace is positioned for strong performance in 2025 and optimistic growth in 2026, with a solid backlog and operational improvements driving future revenue [48][49]

As a result of these factors, we cannot assure you that the forward-looking statements in this presentation will prove to be accurate. You should understand that it is not possible to predict or identify all such factors. We operate in a competitive and rapidly changing environment. New factors emerge from time to time, and it is not possible to predict the impact of all of these factors on our business, financial condition or results of operations. Furthermore, if our forward-looking statements prove to be ...

Core Insights - GE Aerospace is highlighted as a must-buy stock, particularly due to its recent advancements in the GEK800 engine testing, which is aimed at unmanned aerial systems and combat aircraft [1][2] - The collaboration with Kratos Defense reflects a strategic move towards developing affordable, high-performance engines for future defense technologies [2] - Bernstein's analyst Douglas S. Harned reaffirmed an Outperform rating for GE Aerospace, setting a price target of $374, driven by strong performance in the commercial aftermarket segment [3] Company Developments - The altitude testing for the GEK800 engine was completed at Purdue University, marking a significant milestone in the partnership between GE Aerospace and Kratos [1] - The GEK800 engine, weighing 800 pounds, has undergone over 50 ground test starts since the partnership began in 2023, indicating robust progress in development [1] - GE Aerospace has increased its Customer Equipment Services revenue guidance by $1 billion following a solid third quarter performance [4] Financial Performance - Bernstein raised its 2025 earnings estimate for GE Aerospace to $6.28 per share and increased its revenue forecast to $41.8 billion, reflecting confidence in the company's growth trajectory [4] - The LEAP engine deliveries exceeded expectations, contributing to the positive outlook for GE Aerospace's financial performance [4] Industry Context - The collaboration between GE Aerospace and Kratos is supported by the Air Force Research Laboratory and Office of Naval Research, emphasizing the importance of government backing in defense technology advancements [2] - GE Aerospace is recognized as a leader in propulsion systems for both commercial and military aircraft, showcasing its significant role in the aviation industry [5]

Group 1 - ATI's shares increased by as much as 12.9% in early trading due to strong third-quarter earnings and an increase in full-year guidance, indicating positive momentum heading into 2026 [1] - The company generates approximately 86% of its revenue from the aerospace and defense sectors, with 60% specifically from commercial jet engine products [2] - The aerospace market is characterized by a limited number of customers, primarily driven by aircraft production from Boeing and Airbus, as well as engine manufacturing from GE Aerospace, RTX's Pratt & Whitney, and Rolls-Royce [3] Group 2 - Several competitors in the aerospace sector, including GE and RTX, have reported accelerating growth and raised their full-year guidance, reflecting a positive trend in the industry [4] - The aerospace supply chain is recovering, leading to improved availability of parts, which enhances growth outlooks for both ATI and its competitors [6] - ATI raised its full-year earnings per share guidance to $3.15-$3.21 from $2.90-$3.07, indicating strong expectations for 2026 [7]

Core Insights - GE Aerospace has a dominant market position in the aerospace industry, supported by decades of recurring revenue and potential upside from revolutionary technology [1][2] - The company is considered an excellent option for long-term investors, providing a relatively safe investment with exciting growth prospects [2] Market Position - GE Aerospace operates in a highly competitive market with significant barriers to entry, requiring multibillion-dollar investments and expertise, with only three major players: GE Aerospace, RTX's Pratt & Whitney, and Rolls-Royce [3] - GE Aerospace is the leading player, manufacturing engines for key aircraft models, including the sole engine option for the Boeing 737 Max and the upcoming Boeing 777X [6] Revenue Generation - The commercial aerospace engines have a long operational life of about 40 years, generating recurring revenue primarily through maintenance, repair, and overhaul (MRO) services [7] - Approximately 40% of the CFM56 fleet has yet to undergo its first shop visit, indicating substantial future revenue potential [9] Growth Prospects - Management expects LEAP services revenue to match CFM56 services revenue by 2028, indicating a long-term growth trajectory [10] - The company is ramping up LEAP deliveries, with an upgraded estimate for delivery growth to 20% in 2025 [11] Innovative Technology - The long-term growth potential is bolstered by the Revolutionary Innovation for Sustainable Engines (RISE) program, focusing on open fan technology [13][14] - Open fan technology is expected to offer significant advantages in durability and efficiency, with a potential bypass ratio (BPR) exceeding 60, compared to current engines [16][17] Investment Outlook - If the anticipated BPR figures are achieved, RISE technology could solidify GE Aerospace's dominant market position and provide an additional 40 years of lucrative revenue [18]

Group 1 - The core outlook for GE Aerospace indicates significant improvements in revenue and profit projections for 2028 compared to previous estimates [3][4] - Adjusted revenue growth is now expected to be in the double digits, with adjusted operating profit projected at $11.5 billion and free cash flow at $8.5 billion by 2028 [4] - The company's dominant position in commercial airplane engines is anticipated to drive long-term growth through higher-margin service sales [5][6] Group 2 - GE Aerospace's business model focuses on establishing engines with major aircraft manufacturers, leading to multi-decade service sales opportunities due to the long lifespan of engines [6][9] - The LEAP engine fleet is expected to triple by 2030, with a projected 70% increase in narrowbody profit by 2028, driven by ongoing service revenue from both LEAP and CFM56 engines [11] - In the widebody segment, GE holds a significant market share, powering over 50% of widebody departures, with expectations of a 40% increase in widebody profit by 2028 [13][14] Group 3 - Overall, GE anticipates substantial profit improvements by 2028, supported by favorable dynamics in the commercial aerospace sector [16] - The company is expected to grow earnings at a mid-teens rate, backed by a strong market position and a business model that ensures secure growth for many years [17]

Core Insights - CFM International, a joint venture of GE Aerospace, is developing a new engine called RISE that could significantly impact the aerospace industry [2][7] - The RISE engine features an open fan architecture, which allows for a higher bypass ratio and improved efficiency compared to traditional engines [8][9] - The competition between GE Aerospace, RTX's Pratt & Whitney, and Rolls-Royce is intensifying as they develop engines for the next generation of narrowbody aircraft [5][6] Industry Dynamics - Aircraft engines are crucial for the aerospace industry, with manufacturers like GE and RTX investing billions in R&D while generating long-term revenue through aftermarket sales [3] - The development of new engines is closely tied to the evolution of aircraft, with both Boeing and Airbus planning future models that will require advanced engine technologies [5][14] - The potential adoption of different propulsion systems by Boeing and Airbus could lead to significant differences in their aircraft designs over the next decade [14][15] Technological Innovations - The RISE engine aims for a bypass ratio above 70:1, which could result in a 20% reduction in fuel consumption and emissions compared to current advanced engines [9] - CFM's commitment to open fan technology is supported by Airbus, which plans to conduct flight tests of an A380 by 2030 [12] - RTX's strategy focuses on improving existing geared turbofan technology, which may be less risky compared to CFM's revolutionary approach [15] Competitive Landscape - Boeing's recent challenges with the 737 MAX and its financial situation may hinder its ability to lead in new aircraft development [11][15] - If Boeing opts for a ducted propulsion system while Airbus embraces open fan technology, it could face a competitive disadvantage [15] - The stakes are rising for both RTX and GE, indicating that investors should consider these developments when evaluating their stocks [16]

Core Viewpoint - Hexcel (HXL) is currently facing challenges due to low aftermarket demand for its carbon fiber composites, particularly impacted by reduced airplane production expectations from key customers Airbus and Boeing. However, the long-term growth prospects remain strong, and recent positive signs in the aerospace supply chain suggest potential recovery for the company [2][3][5][16]. Company Performance - Hexcel has experienced a difficult period, with Wall Street projecting minimal sales growth for the current year and a decline in earnings per share from $2.03 in 2024 to $1.87 in 2025 due to production shortfalls from major customers [5]. - Approximately 40% of Hexcel's 2024 sales are tied to Airbus, while 15% are linked to Boeing, making the company vulnerable to their production fluctuations [3]. Market Conditions - The commercial aerospace supply chain is showing signs of improvement, with GE Aerospace reporting a 38% increase in LEAP engine deliveries in Q2, and RTX's Pratt & Whitney expected to ramp up production in the second half of the year [9][10]. - Airbus has lowered its production expectations for the A350, which has a shipset value of $4.5 million to $5 million, indicating challenges in the market [4]. Long-term Growth Prospects - Despite current challenges, Hexcel's growth potential is highlighted by the expected ramp-up in aircraft production and deliveries from Airbus and Boeing, which are currently behind schedule [12][15]. - The increasing incorporation of composites in new aircraft generations presents additional opportunities for Hexcel, as aircraft deliveries are anticipated to rise, positively impacting sales and margins [15][16].

Group 1 - GE Aerospace stock has increased over 60% year to date, indicating potential overvaluation concerns among investors, but recent earnings support a long-term investment thesis [1] - Aerospace companies are evaluated based on long-term recurring revenue potential from high-margin services, particularly GE's commercial aerospace engines [2] - The industry model involves selling engines at a loss initially due to high development and production costs, but these engines can generate significant aftermarket revenue over their 40-year lifespan through maintenance, repair, and overhaul (MRO) services [3] Group 2 - GE Aerospace aims to increase engine deliveries for long-term profitability, despite the negative impact on near-term earnings, with a focus on the LEAP engine used in Boeing 737 MAX and Airbus A320neo [4] - In the second quarter, LEAP engine deliveries rose by 38% year over year to 410 units, recovering from a 13% decline in the first quarter, aligning with full-year guidance [6] - While engine delivery growth may suppress near-term profits, it is expected to enhance long-term earnings and cash flow, indicating that GE is addressing supply chain issues that affected deliveries in 2024 [8]

Core Viewpoint - GE Aerospace is expected to report strong second-quarter 2025 results, with earnings projected at $1.43 per share and revenues at $9.7 billion, reflecting year-over-year growth of 19.2% and 17.9% respectively [1][6]. Earnings Estimates - The earnings estimate for the current quarter has increased by $0.01 over the past week, indicating a positive trend [2]. - The consensus estimate for quarterly revenues is $9.7 billion, showing a year-over-year growth of 17.9% [1][6]. Earnings Surprise History - GE Aerospace has consistently outperformed earnings estimates, with an average surprise of 18% over the last four quarters [2]. Earnings Prediction - The company has a positive Earnings ESP of +4.94% and a Zacks Rank of 1 (Strong Buy), suggesting a high likelihood of an earnings beat [3]. Segment Performance - The Commercial Engines & Services segment is expected to generate revenues of $7.43 billion, reflecting a sequential growth of 6.5% due to strong demand for its engine platforms [4]. - The Defense & Propulsion Technologies segment is anticipated to achieve revenues of $2.57 billion, indicating a 10.5% sequential increase, driven by rising defense budgets and demand for commercial air travel [5]. Operational Investments - GE has been investing in expanding and upgrading manufacturing facilities in the U.S., which is expected to enhance operational capacity and meet increased demand [6][7]. Portfolio Restructuring - The completion of the Vernova spin-off has allowed GE to focus on its core aerospace business, improving operational focus and financial flexibility [8]. Cost Challenges - High costs and operating expenses from restructuring activities and supply chain challenges may impact performance [9]. Stock Performance - GE Aerospace's shares have increased by 43.8% over the past three months, outperforming the Zacks Aerospace-Defense industry and the S&P 500 [10]. Valuation Metrics - The company is trading at a forward P/E ratio of 43.47X, which is higher than the industry average of 27.51X, indicating potential vulnerability to market sentiment shifts [12]. Investment Outlook - The robust portfolio and strength in aerospace and defense markets are expected to drive performance, with organic revenue growth projected in the low-double-digit range for 2025 [15]. - The company's focus on reducing operational costs and improving margins is expected to enhance long-term cash flow [16]. - Given the positive analyst sentiment and growth prospects, the current market conditions may be favorable for potential investors [18].