GE(GE) - 2025 Q4 - Earnings Call Transcript

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]