Financial Data and Key Metrics - Revenue increased by 6% YoY, driven by growth in services and equipment [5] - Operating profit rose by 14% YoY, with adjusted EPS up 25% [5] - Free cash flow reached $1.8 billion, with a conversion rate of over 140% [5] - Year-to-date, operating profit increased by more than $1 billion, or 25%, driven by commercial services strength [16] - Free cash flow year-to-date was $4.6 billion, up more than $1 billion YoY, with nearly 130% conversion [16] Business Line Performance - Commercial Engines & Services (CES): Orders increased by 29%, with services and equipment both growing over 20% [5] - Services revenue grew 10%, supporting a 16% YoY increase in operating profit [6] - Equipment revenue grew 5%, with customer mix and price offsetting lower unit shipments [16] - Operating profit for CES was $1.8 billion, up 16% YoY, with margins expanding 180 basis points [17] - Defense & Propulsion Technologies (DPT): Orders increased by 19%, but profit declined [6] - Revenue grew 2%, with Defense & Systems revenue down 2% due to lower engine deliveries [18] - Profit for DPT was $220 million, down 18% YoY, impacted by inflation and investments in next-gen programs [18] Market Performance - Demand for services and products remains robust, with departures up high-single digits YoY and LEAP share of global narrowbody departures increasing over 20% [7] - LEAP fleet size is projected to double by 2030, driving aftermarket growth [9] - In Defense, the Polish Ministry of National Defense will add over 200 T700 engines, and the company secured commitments from Eva Air and Qatar Airways for GEnx and GE9X engines [12] Strategic Direction and Industry Competition - The company is leveraging its FLIGHT DECK operating model to improve efficiency, reduce turnaround times, and expand capacity [10] - Investments of $1 billion in MRO over the next five years aim to enhance inspection techniques and repair capabilities [10] - The company is advancing RISE technologies, including open fan design and turboprop technology, to support sustainable aviation [13] - In Defense, the T901 engine is progressing towards power-on and ground runs, and the XA100 engine completed its fourth round of testing [14] Management Commentary on Operating Environment and Future Outlook - The company raised its full-year guidance due to strong results and expects continued growth in 2025 [7][20] - Management highlighted the importance of supplier collaboration and FLIGHT DECK improvements to meet demand [8][34] - The company is focused on improving LEAP durability and expanding aftermarket capacity to support future growth [9][11] Other Important Information - The company is on track with post-spin separation and restructuring plans, with corporate costs down 25% YoY [19] - Non-GAAP adjustments included gains from the sale of the licensing business and impairment of Colibrium Additive goodwill [19] Q&A Summary Question: 2025 Profit Growth Expectations - The company is working through its 2025 outlook, with a higher starting point due to improved 2024 guidance [26][27] - Commercial services are expected to grow low-double digits, supported by a significant backlog of shop visits and price increases [28] - Equipment growth is expected to accelerate in 2025, with higher 9X shipments, though this may pressure margins [29] Question: LEAP Output and Supply Chain Constraints - The company is focused on improving LEAP output, with sequential improvements in supplier output and new HPT blade certification expected soon [32][34] - The new HPT blade is easier to manufacture and will help increase output, with durability improvements expected to align LEAP with CFM56 levels [34][35] Question: Boeing 777X Program Delay - The delay in the 777X program has no operational impact on GE Aerospace, with engine deliveries continuing as planned [36] - Financial implications include potential adjustments in engine delivery volumes for 2025, with the program expected to be profitable by 2030 [37] Question: Customer Concessions and Penalties - The company has not incurred significant penalties for delivery delinquencies, with improvements expected in the fourth quarter [39][40] Question: DPT Profitability and Margin Pressure - DPT profitability is under pressure due to increased R&D investments in next-gen programs, but the backlog supports mid-to-high single-digit growth in 2025 [41][42] Question: Shop Visits and Spare Parts Sales - Shop visits were flat YoY, but spare parts sales increased, with a high backlog of shop visits expected to drive growth in the fourth quarter [44][46] Question: LEAP Profitability in 2025 - LEAP profitability is expected to improve in 2025, driven by durability enhancements and growth in spare parts sales to third-party networks [50] Question: New HPT Blade Certification and LEAP Output - The new HPT blade is already in production, with certification expected soon, which will help improve LEAP output and durability [54] Question: CFM Shop Visits and Widebody Engines - CFM shop visits are expected to peak in 2025 and remain at that level until 2027, with GE90 engines entering their second shop visit phase [56][57] Question: Supplier Output and FLIGHT DECK Improvements - Supplier output increased by 18% sequentially, with further improvements expected in the fourth quarter and 2025 through FLIGHT DECK initiatives [60][61] Question: 777X Headwind and CES Margins - The 777X program will create a headwind in 2025, with specific impacts to be quantified in January, while CES margins are expected to remain stable despite mix pressures [64][65]
GE(GE) - 2024 Q3 - Earnings Call Transcript