GE Aerospace Faces Stock Sell-Off Despite Optimistic Outlook

A recent report indicates a mixed future for GE Aerospace. While stock prices fell due to reduced LEAP engine delivery expectations, management's positive outlook on aftermarket services could stabilize earnings.

Date: 29-10-2024

AI Rating: 5

The report discusses the challenges and opportunities facing GE Aerospace amidst stock price fluctuations. Key points include:

LEAP Engine Deliveries: GE had initially expected a 20%-25% increase in LEAP engine deliveries but has revised this forecast down to a 10% decline for 2024. This negative adjustment reflects market conditions affecting earnings in the short term.
Aftermarket Services Revenue: The report highlights the significance of aftermarket services for GE's legacy airplane engines, particularly the CFM56. CFO Rahul Ghai indicated that shop visits for the CFM56 engines are now expected to peak in 2025, extending their revenue contribution beyond previous estimates.

This extended peak means a potential uptick in service revenue, as the report suggests that second and third shop visits generate a larger percentage of lifecycle revenue compared to the first visit. GE's management expressed optimism regarding these opportunities, which may help mitigate some of the negative impacts on stock performance from the reduced deliveries of new engines.

The overall outlook appears cautiously optimistic, signaling that while immediate challenges exist due to reduced deliveries, the underlying strength in aftermarket services could lend support to GE’s long-term profitability and stock value. However, investors should remain aware of ongoing supply chain issues and broader market dynamics affecting the aerospace sector.

Stocks: GE